Happy Forgings Limited — Q3 FY26 earnings call

Call held 10 Feb 2026

Management summary

Happy Forgings delivered a strong Q3 and 9M FY26, achieving record high revenues, gross profit, EBITDA, and PAT, with EBITDA margins reaching 30.8%. The company saw robust domestic growth across key segments and secured INR 800 crores in new business for future growth. Despite subdued direct exports and some segment-specific softness, strategic capacity expansions and cost efficiency initiatives are well underway, supported by a strong balance sheet.

Highlights

  • Robust operating and financial performance with Q3 FY26 revenue at INR 391 crores (+10.4% YoY) and PAT at INR 79 crores (+22.3% YoY).

  • Achieved highest ever EBITDA PAT margin in Q3 FY26, with EBITDA margin at 30.8% and PAT margin at 20.2%.

  • Strong volume growth of 13.8% YoY in Q3 FY26, driven by domestic CV, farm, industrial, and passenger vehicle segments.

  • Secured INR 800 crores of new and incremental peak annual business, expected to commence from FY27, with INR 180 crores already signed for heavy engineering.

  • Strengthened balance sheet with INR 315 crores in cash flow from operations for 9M FY26 and total liquid assets exceeding INR 400 crores.

Concerns

  • Direct exports remained subdued during Q3 FY26 due to ongoing weakness in certain end markets and tariff-related uncertainties.

  • Off-highway domestic segment experienced softness due to slower project awards and land acquisition delays.

  • Realizations were marginally lower in Q3 due to changes in product mix and lower scrap prices, despite overall gross margin improvement.

Key financials

2 periods

Q3

  • Revenue from Operations
    ₹391 Cr
    YoY +10.4%
  • Gross Profit
    ₹230 Cr
    YoY +12.2%
  • Gross Margin
    58.9%
  • EBITDA
    ₹120 Cr
    YoY +18.7%
  • EBITDA Margin
    30.8%
  • PAT
    ₹79 Cr
    YoY +22.3%
  • PAT Margin
    20.2%

9M

  • Revenue from Operations
    ₹1,122 Cr
    YoY +6.2%
  • EBITDA
    ₹337 Cr
    YoY +10.8%
  • EBITDA Margin
    30.1%
  • PAT
    ₹218 Cr
    YoY +11.8%
  • PAT Margin
    19.4%

What they filed

Q1 FY27: revenue up 26.8%, net profit up 37.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue361 354 352 354 377 +4%391 +10%424 +20%449 +27%
EBITDA105 101 102 101 116 +10%120 +19%133 +30%141 +40%
Net profit71 65 68 66 73 +3%79 +22%84 +24%91 +38%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Commercial Vehicle
    37% Share of Operating Revenue (9M)
  • Farm Equipment
    33% Share of Operating Revenue (9M)
  • Industrials
    14% Share of Operating Revenue (9M)
  • Off-highway
    11% Share of Operating Revenue (9M)
  • Passenger Vehicles
    5% Share of Operating Revenue (9M)

Order book

high confidence

Total value

₹800 Cr

as of 2025-12-31 quantified

Execution

scale up over the next 2 to 3 years

Composition

Mix 4 segments
  • Passenger Vehicle 24%
  • Commercial Vehicle 27%
  • Industrial 44%
  • Farm Equipment 4%

Share of order book by segment

Pipeline

other

INR 180 crores of signed orders for heavy engineering (large crank shaft family)

The company has strong visibility on new and incremental peak annual business, with a significant portion linked to industrial and passenger vehicles, and two-thirds oriented towards export markets.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹480 Cr internal accruals
    • Augmenting high-growth capabilities and enhancing long-term value
    • Machining capacity expansion (9,800 MT in Q3 FY26)
    • Forging capacity expansion (10,000 ton press in Q4 FY26, 4,000 ton press in H1 FY27)
    • Heavy component related capex
    • Captive solar power plant

    Previously planned ₹400 Cr

    Our ongoing capex program is progressing as per schedule. With INR300 crores deployed in the first 9 months of the year, we expected our total capex for FY '26 to be in the range of INR400 crores to INR500 crores, all of which aimed at augmenting our high-growth capabilities and enhancing long-term value for our stakeholders.
  • Liquidity Cash ₹400 Cr Total liquid assets exceeding INR 400 crores, providing significant buffer and financial flexibility to fund growth initiatives from internal accruals.
    Our treasury cushion has further strengthened with total liquid assets now exceeding INR400 crores. This provides us with a significant buffer and the financial flexibility to fund our growth initiatives from internal accruals.

Guidance & targets

Margin

  • EBITDA Margin Margin · medium term · High confidence 29-31%
    Our focus remains on maintaining EBITDA margins within a sustained range between 29% to 31% over the medium term.

    — Ashish Garg, Managing Director

Order Inflow

  • New and incremental peak annual business Order Inflow · from FY27 onwards · High confidence INR 800 crores
    We have visibility of new and incremental peak annual business of approximately INR800 crores, expected to commence from FY '27 onwards, which will scale up over the next 2 to 3 years.

    — Ashish Garg, Managing Director

Capacity

  • Machining Capacity Capacity · end of FY27 · High confidence 82,000 tons

    Previously 68,000 MT → 82,000 tons

    Yes. So FY '27, we'll be looking at forging capacity of 150,000 tons and the machining capacity is around 82,000 tons.

    — Ashish Garg, Managing Director

  • Forging Capacity Capacity · end of FY27 · High confidence 150,000 tons

    Previously 127,000 tons → 150,000 tons

    — Ashish Garg, Managing Director

  • Forging Capacity Capacity · FY28 · Medium confidence 180,000 tons
    Around 180,000 tons on the forging side and around 90,000 tons in terms of the machining.

    — Ashish Garg, Managing Director

  • Machining Capacity Capacity · FY28 · Medium confidence 90,000 tons

    — Ashish Garg, Managing Director

Cost Efficiency

  • Power Cost Reduction (Annual) Cost Efficiency · annualized basis, partly FY28, fully thereafter · High confidence INR 25-30 crores
    So we expect to reduce our power cost by INR25 crores to INR30 crores per annum, which is a substantial cost reduction that we'll be seeing on our power grid on an annualized basis.

    — Ashish Garg, Managing Director

Export Mix

  • Export Percentage Export Mix · from second quarter of next financial year · Medium confidence meaningful improvement
    And we expect export percentage to improve meaningfully from second quarter of next financial year.

    — Ashish Garg, Managing Director

Revenue Mix

  • U.S. Revenue Contribution Revenue Mix · 2-3 years down the line · Medium confidence 15-16%

    Previously 7-8% → 15-16%

    So Mitul, so right now, we are around 7% to 8% on direct and indirect business to U.S. This will definitely inch up to 15% to 16% going forward.

    — Ashish Garg, Managing Director

What to watch in Q4 FY26

Export Revenue Growth

Q2 FY27
Current Largely flat YoY, modest sequential increase
Target Meaningful improvement

Why it matters

Indicates diversification and potential for higher margins, crucial for overall growth.

And we expect export percentage to improve meaningfully from second quarter of next financial year.

Risks & concerns

  • Subdued Direct Exports

    medium

    Direct exports remained subdued due to ongoing weakness in certain end markets and tariff-related uncertainties, with some reclassification of revenues.

    Management acknowledged

  • Challenging Macro Environment

    medium

    Period marked by softening steel prices, weak global demand, and geopolitical events.

    Management acknowledged

  • Raw Material Price Volatility (Steel)

    medium

    Steel prices have started moving up, and while 85% is pass-through, there is a lag of 1-3 months, and scrap prices are not pass-through.

    Management acknowledged

  • Off-highway Segment Softness

    low

    Domestic off-highway segment saw softness due to slower project awards and land acquisition approval-related delays.

    Management acknowledged

Q&A highlights

8 direct
Gross Margin Improvement and Realization Direct
That's largely on account of the product mix changes, which is happening and whereas the new product introduction is at better realization rate, which is kind of improving the overall average for the realizations. And this is despite the falling raw material prices that has happened in the last 1.5, 2 years.

Clarifies the drivers behind the improved gross margins despite softening raw material prices and marginally lower realizations, attributing it to product mix and new product introductions.

Asked by Preet Pitani

Industrial Segment Components and Growth Direct
So railways is a very small segment for us. We produce piston pins for local applications, where we are import substitutes. And within industrial, we supply crank shafts as well as wind pinions. The large crank shaft goes for heavy genset applications and the wind pinions are for wind gearboxes.

Provides specific examples of components supplied to the railway and industrial segments, offering insight into the company's product portfolio within these areas.

Asked by Mihir Vora

Heavy Engineering Order Book Confirmation Direct
So on the heavy engineering, particularly on the large crank shaft family, we have close to INR180 crores of signed orders right now. And going forward, we are waiting for the capacity to come in place, but we are already in discussions with several OEMs for this project.

Confirms a specific value for signed orders in the heavy engineering segment, indicating tangible progress on the new INR 800 crores business pipeline.

Asked by Mihir Vora

Heavy Engineering Plant Utilization Timeline Direct
So some bit of utilization will start coming from FY '28 and largely from FY '29.

Provides a clear timeline for when the new heavy engineering capacity is expected to contribute meaningfully to revenue, which is crucial for future growth projections.

Asked by Mihir Vora

Steel Price Pass-through and Forex Hedging Direct
So steel is a pass-through in most of the cases, you can say almost 85% of the business, steel is a pass-through, but there is a lag of 1 month. And in export, there is a lag of 1 quarter. But scrap is not a pass-through. So whatever scrap gain or loss comes, that goes directly in the EBITDA.

Explains the company's policy on raw material price pass-through and forex hedging, clarifying how these factors impact profitability and the lag involved.

Asked by Joseph George

Domestic vs Export Growth Split Direct
So roughly 55% of our revenue comes from domestic CV and domestic farm business. So where in terms of value, we have grown by almost 22%, you can see on an average in terms of value. In terms of volume it is slightly better.

Provides a quantitative breakdown of growth rates for domestic segments (CV, farm) versus export segments (off-highway, CV export, PV), highlighting areas of strength and weakness.

Asked by Sahil Sanghvi

U.S. Tariffs and Competitive Advantage Direct
You are right. India will be at an advantageous position if you compare it with China as well as Brazil because a lot of forged and machine components of this size are actually coming out of Brazil in the U.S. markets. Brazil today is at 50% and so is China. So India will get the benefit of this.

Addresses the potential impact of U.S. tariffs on 232 section products, suggesting a competitive advantage for India over other countries like China and Brazil in certain forged components.

Asked by Nitin Agrawal

Solar Project Benefit Timeline Direct
No. Once the facility started, Mitul, we can reach the idle generation levels within 10, 15 days. Just that October to February or mid-Jan period is a winter period in North India, where generation is relatively lesser. But yes, you can see that we can start producing peak units from mid-February onwards on the plant.

Clarifies the operational timeline and ramp-up for the captive solar power plant, including seasonal variations in generation, which impacts the realization of cost savings.

Asked by Mitul Shah

2 min read 6 chapters

Detailed narrative

Strong Q3 & 9M FY26 Financial Performance

Happy Forgings delivered a robust Q3 FY26, with revenue from operations reaching INR 391 crores, marking a 10.4% YoY increase. Profitability significantly outpaced revenue growth, as PAT surged by 22.3% YoY to INR 79 crores. The company achieved its highest ever EBITDA margin at 30.8% for the quarter and crossed 30% for the nine-month period, demonstrating strong operational efficiencies and product mix benefits.

Strategic Capacity Expansion Underway

The company is actively investing in capacity expansion to support future growth. Machining capacity increased by 9,800 MT in Q3 FY26, reaching 68,000 MT. Further forging capacity additions include a new 10,000 ton press in Q4 FY26 and a 4,000 ton press in H1 FY27, targeting 150,000 tons forging and 82,000 tons machining capacity by end FY27. These expansions are in anticipation of the INR 800 crores new business pipeline.

Diversified Segment Performance and Outlook

For 9M FY26, commercial vehicles contributed 37% and farm equipment 33% to operating revenue, both showing healthy domestic growth. Industrials (14%) delivered stable performance, while off-highway (11%) experienced some softness. Passenger vehicles, though a smaller segment at 5%, demonstrated strong YoY growth of approximately 37%, with significant scaling expected in the coming years due to strong visibility on incremental business.

Export Market Challenges and Future Opportunities

Direct exports were subdued in Q3 FY26 due to global demand weakness and tariff uncertainties. However, combined direct, deemed, and indirect exports, representing about one-fourth of finished goods sales, showed a modest sequential increase. Management anticipates meaningful improvement in export percentage from Q2 FY27, driven by new programs for U.S. industrial, EV, and PV sectors, with U.S. revenue contribution targeted to increase from 7-8% to 15-16% in 2-3 years.

Cost Efficiency and Strong Balance Sheet

The company maintained a robust balance sheet, generating INR 315 crores in cash flow from operations for 9M FY26 and holding over INR 400 crores in total liquid assets. To enhance cost efficiency and support ESG commitments, Happy Forgings has leased 80 acres for a captive solar power plant, expected to reduce annual power costs by INR 25-30 crores, with benefits commencing partly in FY28.

Raw Material and Forex Management Strategy

Gross margin improvement was primarily driven by product mix changes and better realization rates for new products, despite softening steel prices. While steel prices are largely pass-through (85% of business) with a 1-3 month lag, scrap prices are not pass-through, impacting margins. Forex exposure is managed through hedging for 1-1.5 years or pass-through mechanisms in contracts.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls