MM Forgings Limited

M M Forgings reported a consolidated turnover of Rs. 1,547 crores for FY25, a slight decrease from Rs. 1,585 crores in the previous fiscal. Despite this, the company demonstrated strong margin improvement, with consolidated EBITDA reaching 19.4% (up from 18.73% in FY24) and standalone EBITDA at 19.91% (up from 18.9% in FY24). Management highlighted that EBITDA levels are steadily improving and are now at the cusp of the 20% mark, with a target to reach 20% by Q3-Q4 of the current fiscal year. Production volume for FY25 stood at 82,000 tons.

Region-wise, India contributed 62% of the company's turnover, with Europe and the US together accounting for 28% (12% and 16% respectively), and the rest of the world 10%. Automotive Commercial Vehicles (CV) remained the dominant segment, comprising 81% of the sales profile, followed by pass car at 10% and off-highway at 9%. A significant strategic shift was noted in the product mix, with machined products now constituting 58% of sales in FY25, a substantial increase from 20% in FY16 and 44% in FY24. The company aims to further increase this to around 65% in the current fiscal or next, with a medium-term goal of 65-70%.

The export market, particularly the US and Europe, experienced a slowdown in the second half of FY25, leading to a reduced number of shipments. Management expressed caution regarding the FY26 export outlook, anticipating a 10-15% decline due to global trade uncertainties, especially concerning the Trump administration's policies and the ongoing slowdown in the US truck market (down 30-40%). Despite these headwinds, the company is actively discussing with several customers and expects to secure new export orders worth at least Rs. 100 crores in FY27 and FY28, primarily in the non-auto space.

The domestic CV market showed strong demand in Q1 FY26, driven by new cabin regulations mandating AC in trucks, which spurred pre-buying. For CAPEX, M M Forgings spent Rs. 340 crores in FY25, with Rs. 150 crores allocated to the large press, Rs. 100 crores to direct machining investments, and Rs. 50 crores to other forging equipment. The company plans a CAPEX of Rs. 300 crores for FY26, to be funded entirely through internal accruals. The new 16,500-ton press is expected to be commissioned by Q3 FY26 and begin production from January onwards. The total forging capacity stands at 1,26,000 tons.

The EV components business, acquired for future growth, has not yet generated revenue. Management attributed this to customer reluctance to adopt new suppliers (preferring established players) and the slower-than-anticipated uptake of EV aspirations in India. While the company acknowledges the need for diversification beyond the automotive sector, it notes that non-auto customers are smaller and growth is slower. Efforts are ongoing to expand in the non-auto space, with an expectation of generating around Rs. 100 crores in sales from this segment, aiming for it to contribute 20-25% of total sales in a 3-5 year timeframe.

The company's net debt stood at Rs. 970 crores at the end of FY25. Management expects net debt to remain stable or slightly decrease by Rs. 30-40 crores in FY26. On the working capital front, receivables increased significantly from Rs. 275 crores in FY24 to Rs. 375 crores in FY25. Management attributed this rise to last-minute sales in the fourth quarter, clarifying that there were no specific changes in credit terms or customer defaults.