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    Happy Forgings

    HAPPYFORGE
    Capital Goods·11 Aug 2025
    Management Summary

    Happy Forgings delivered a resilient Q1 FY26 with 3.6% YoY revenue growth to ₹354 crores and strong EBITDA margins of 28.6%. This performance was supported by new business wins in farm equipment, wind, and industrial sectors, offsetting declines in export-oriented CV and off-highway segments. The company is confident in sustaining margins and continues with its CAPEX plans for capacity expansion and diversification, despite ongoing global market uncertainties and tariff-related headwinds.

    Highlights

    5

    • Revenue of ₹354 crores, up 3.6% YoY, driven by new business segments and onboarding.

    • EBITDA margin at 28.6% and gross profit margin at 57.9%, both around peak levels, demonstrating resilience despite industry headwinds.

    • Finished goods volume increased by 3.8% YoY to 14,457 MT, with realizations remaining strong at ₹245 per Kg.

    • Significant new order wins including ₹250 crores for European farm equipment, ₹300 crores for wind energy, and ₹180 crores for industrial/data center components.

    • Domestic business grew by almost 7% YoY, countering declines in export segments.

    Concerns

    4

    • Export segment saw a decline due to continued weakness in commercial vehicles, off-highway, and farm equipment, coupled with tariff-related uncertainty.

    • US and European CV unit sales declined 8-10% for the April-June quarter, marking 7-8 consecutive quarters of decline.

    • Off-Highway segment experienced softness domestically and globally, with a 10-12% decline in Europe and US.

    • Industry weakness in farm equipment exports, with large OEMs forecasting 5-15% decline for CY25.

    What Changed2

    vs Q2 FY26

    Guidance items15 → 6 (-9)Risks discussed5 → 4 (-1)

    Key financials

    Single quarter

    09 metrics
    1. 01Revenue₹354 Cr+3.6%YoY
    2. 02EBITDA₹101 Cr
    3. 03EBITDA Margin28.6%+3.6%YoY
    4. 04PAT₹66 Cr
    5. 05PAT Margin18.6%+3.2%YoY

    Segment breakdown

    Commercial Vehicles
    39% Revenue Contribution
    Farm Equipment Sector
    32% Revenue Contribution
    Off-Highway
    10% Revenue Contribution
    Industrials
    13% Revenue Contribution
    Passenger Vehicles
    6% Revenue Contribution
    List

    Order Book

    medium confidence

    Composition

    Mix3 segments
    • Farm Equipment (Europe)₹ 250 crores34.2%
    • Wind Energy₹ 300 crores41.1%
    • Industrial (Data Centers)₹ 180 crores24.7%

    Share of order book by segment (derived from disclosed amounts)

    Pipeline

    other

    Another large farm equipment business in discussions in Europe; several businesses quoted for high horsepower line; winds coming up in PV side/European market; CV client setting up transmission plant in India.

    "Strong business flow and pipeline, especially for European markets given currency situation, and new orders in industrial and wind sectors."

    Source:
    Q&A

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹120 crores this quarter · ₹300 crores (FY26) planned

    Liquidity

    Cash ₹350 crores

    Adequate liquidity to support ongoing investment.

    Guidance & targets

    6
    CategoryTargetPriority
    Revenue
    Revenue Growth
    15-18%
    		Medium
    Revenue
    PV Segment Revenue Contribution
    8-10%
    		High
    Revenue
    Front Axle Beam Revenue
    ₹50-60 crores
    		High
    Volume
    Front Axle Beam Units
    35,000 units
    		High
    Capacity
    Total Forging Capacity
    1,50,000 tons
    		High
    Capex
    Solar CAPEX Commencement
    Q1 FY27
    		High

    Precision Machine Components for Power Sector

    Q4 FY26
    CurrentRamp-up starting this quarter
    TargetFull utilization

    Why it matters

    This is a new ₹145 crores order (₹30 crores annually) expected to contribute to revenue and margin.

    So, there was a Rs.145 crores order that we received for the precision machine components for power sector, roughly some Rs.30 crore annually expected to start in 2QFY26. So, just was looking to get some timeline or an update for that? ... Okay. This is for the industrial genset business I think you are talking about which is for the North American market and for which the testing is almost over the line is ready with us and we are expected to start ramp up in this quarter. And we expect full utilization to come from fourth quarter and around 50% utilization by third quarter on this line.

    How to verify

    key_financials.segment_breakdown[name='Industrials']

    Risks & concerns

    4
    RiskSeverity

    Export Market Weakness

    Uncertainty in export markets, influenced by tariff regimes, leading to decline in export segment revenue. — Management acknowledged

    medium

    Commercial Vehicle Industry Slowdown

    Global CV industry operating in a challenging environment, with 8-10% decline in US and European CV unit sales for April-June quarter, and negative outlook for CY25. — Management acknowledged

    high

    Off-Highway Market Softness

    Softness in off-highway segment domestically and globally (10-12% decline in Europe/US), with subdued sales expected in 2025. — Management acknowledged

    medium

    Tariff-related Headwinds

    Possibility of indirect impacts on European market from US tariff measures; direct exposure to US is modest and existing contracts are structured to mitigate tariff impact. — Management downplayed

    medium

    Q&A highlights

    8

    “So, as I have understood you correctly, yes, the forging utilization right now is around 59%. And that is in terms of tonnage. But in terms of numbers if you see the forging utilization is close to 74% in terms of numbers. So, we have possibility to increase this utilization by almost 18%-20%. As forging infrastructure takes a long time to build, and we have seen a slowdown in the market for the last four, five quarters, we expect once the momentum is there, definitely this utilization levels will improve, because the same die runs will be bigger, longer, and we can easily cash on this opportunity. And definitely, some bit of fixed cost will get divided and definitely there is room for further improvement in terms of EBITDA margin as well as the operational efficiencies will improve.”

    Analyst questioned how high margins are maintained with lower capacity utilization; management explained the difference between tonnage and number utilization and potential for further margin improvement with increased utilization.

    asked by Pratik Jain

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Happy Forgings reported a resilient Q1 FY26 with revenue reaching ₹354 crores, marking a 3.6% year-on-year growth. This growth was achieved despite a 3% raw material price correction. The company maintained strong profitability with a gross profit margin of 57.9% and an EBITDA margin of 28.6%, which is up 3.6% on a YoY basis. PAT stood at ₹66 crores, reflecting an 18.6% margin, up 3.20% YoY, demonstrating sustained performance amidst industry headwinds🌐.

    02

    Volume and Realization Trends

    Finished goods volume for the quarter increased by 3.8% year-on-year, reaching 14,457 MT. Realizations remained strong at ₹245 per Kg on a year-on-year basis, supported by a higher share of value-addition components. The machining share of revenue remained robust at 88%, indicating a continued focus on precision-engineered components. The company also improved cash flows by concluding negotiations on payment terms and INCOTERMS with some customers.

    03

    Segmental Performance and Diversification

    Domestic business grew by almost 7% YoY, while the export segment declined due to weakness in commercial vehicles and off-highway. Commercial Vehicles contributed 39% to revenue, Farm Equipment 32%, Off-Highway 10%, Industrials 13%, and Passenger Vehicles 6%. The company's diverse segment mix is a key strength, helping to weather global volatility🌐 and capitalize on domestic structural demand. The PV segment is expected to grow to 8-10% of total revenues over the next two years.

    04

    New Business Wins and Order Pipeline

    Happy Forgings secured significant new orders, including ₹250 crores for farm equipment from a European OEM (₹50-60 crores per annum), ₹300 crores for the wind energy sector (₹60-70 crores per annum), and a large ₹180 crores annual order for industrial components for data centers. The company is also in discussions for another large farm equipment business in Europe and has quoted for several high-horsepower line businesses, indicating a strong pipeline for future growth.

    05

    CAPEX and Capacity Expansion

    The company is on track with its ₹650 crores CAPEX plan for heavyweight precision components. During the year, an additional 20,000 MTPA capacity will be commissioned through 10,000-ton and 4,000-ton presses, bringing total forging capacity to nearly 1,50,000 tons. For Q1 FY26, ₹120 crores was spent on CAPEX, with a total FY26 plan of ₹300 crores (excluding solar). An additional ₹80 crores CAPEX is committed for the PV segment, and ₹110 crores was invested in a new machining line in Q1.

    06

    Market Headwinds and Tariff Situation

    The global commercial vehicles industry continues to face challenges, with US and European OEMs reporting 8-10% decline in unit sales. The Off-Highway market also saw a 10-12% decline in Europe and US. While tariff-related headwinds persist, particularly a 25-26% tariff for automotive components to the US, management believes its direct exposure is modest (3-4%) and existing contracts are structured to protect against tariff impacts, with no plans to share tariff increases.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.