MM Forgings Limited

M M Forgings reported a challenging first half of FY26. Turnover stood at INR758 crores, a decrease from INR793 crores in the previous half year, representing a 4.41% YoY decline. EBITDA for H1 FY26 was INR142 crores, down from INR162 crores, with EBITDA margin compressing to 19% from 21%. Profit before tax (PBT) and Profit after tax (PAT) also saw significant declines, reaching INR53 crores and INR36 crores respectively, compared to INR87 crores and INR62 crores in the prior period.

Domestic sales remained stable at 61.5% of total sales. However, sales to America dropped significantly from 16% to 9% due to a slowdown in the Class VIII truck market and inventory build-up at customer ends. Europe contributed 21% and South America 6%. The product mix shifted slightly, with as-forged sales at 46% (down from 48%) and as-machined sales at 54% (up from 52%). The end-use segment breakdown remained consistent with 80% from Commercial Vehicles, 10% from Pass Cars, and 10% from Off-Highway & Engineering.

The company is installing a 16,500 ton hot forging mechanical press, expected to be commissioned by March/April 2026. This new capacity is projected to add approximately INR300 crores in annual turnover, with revenue starting to appear from Q2 FY27. Overall, the company plans to add 15,000 to 20,000 tons to its capacity next year, pushing total capacity to around 140,000 tons, and aims for INR2,000 crores in revenue by FY27 with EBITDA margins upwards of 20%.

Abhinava Rizel, the EV subsidiary, is making progress despite initial challenges like magnet supply disruption from China. The company has developed new motors and has received orders for sample parts, expected to be delivered by the end of November 2025. This customer has committed to an annual potential of INR20-30 crores. Abhinava Rizel is also diversifying into controllers and has ready samples, aiming to commercialize this foray soon.

Capex for H1 FY26 was INR100 crores, with an additional INR70 crores or less planned for H2 FY26. FY27 capex is projected to be INR100-120 crores. Net debt at the end of Q2 FY26 stood at INR855 crores, which management considers peak for current operations. The company is actively working to reduce working capital by INR50-75 crores through inventory compression. Furthermore, efforts are underway to convert rupee debt into foreign currency loans to reduce interest costs, targeting an annual saving of INR12 crores and a future run rate of INR50-60 crores.

Management expects Q2 FY26 to be the worst quarter and anticipates a rebound in H2 FY26, with revenue projected to be INR750-800 crores, bringing the full year close to previous year's numbers. The US Class VIII truck market is showing signs of recovery, with purchases starting from November 2025 and a reasonable level expected by June next year. FY27 is projected to be a 'breakout year' for the company, driven by new capacity and market recovery.