Happy Forgings gains on order book, exports and complex-component capacity expansion
Happy Forgings Ltd.
BUY
₹1,695
₹1,802.6
₹2,450
44.54%
Investment View and Growth Outlook
In its November 9, 2026 results update, ICICI Securities retained its BUY recommendation on Happy Forgings. The broker believes the company has a long growth runway, supported by wallet-share gains with existing customers, accelerating exports, an order book of about Rs 10,000 million executable over two to three years, and a large global opportunity from the ongoing supply-chain shift.
ICICI Securities expects Happy Forgings to continue outpacing peers and the industry as it expands into heavier and more complex components, which could also improve profitability.
Q2 FY27 Financial Performance
Happy Forgings reported Q2 FY27 revenue of Rs 5,007 million, up 33 per cent YoY and 11 per cent QoQ, and 2 per cent above ICICI Securities' estimate. EBITDA was Rs 1,531 million, up 32 per cent YoY and 9 per cent QoQ. EBITDA margin was 30.6 per cent, down 10 basis points YoY and 80 basis points QoQ, but 10 basis points ahead of the broker's estimate. Adjusted PAT was Rs 975 million, up 33 per cent YoY and 7 per cent QoQ, and 2 per cent above the estimate.
| Metric | Q2 FY27 | YoY change | QoQ change | Versus estimate |
|---|---|---|---|---|
| Revenue | Rs 5,007 million | +33 per cent | +11 per cent | 2 per cent above |
| EBITDA | Rs 1,531 million | +32 per cent | +9 per cent | Not specified |
| EBITDA margin | 30.6 per cent | Down 10 basis points | Down 80 basis points | 10 basis points ahead |
| Adjusted PAT | Rs 975 million | +33 per cent | +7 per cent | 2 per cent above |
Operating Performance and Segment Trends
Operational performance was supported by around 25 per cent YoY tonnage growth to 18,754 MT and a 6 per cent YoY rise in realisation to Rs 267 per kg. Management attributed the higher realisation to a richer product mix and commodity-cost pass-through.
Segment growth was 25 per cent in commercial vehicles, 161 per cent in passenger vehicles, 8 per cent in farm equipment, 71 per cent in off-highway vehicles and 63 per cent in industrials. Domestic plus deemed-export revenue grew 33 per cent YoY, while direct exports also grew about 33 per cent. The machining share of revenue improved to 90 per cent from 88 per cent in H1 FY26. Within commercial vehicles, domestic revenue grew 33 per cent YoY while exports declined 6 per cent.
Demand Drivers and Order Book
Management indicated that domestic commercial-vehicle momentum remains healthy due to the execution of new orders and market-share gains. Although farm-equipment industry volumes are expected to decline in H2 FY27 because of a high base, management expects higher wallet share from existing customers and export ramp-up to support Happy Forgings' growth.
ICICI Securities also sees new industrial and passenger-vehicle programmes, alongside wallet-share gains, as further growth drivers. About 60 per cent of the Rs 10,000 million new-business order book is for export industrial and passenger-vehicle programmes.
Participating in Future Growth Themes
Structural changes and innovation can create long-term investment opportunities. DSIJ's Vriddhi Growth focuses on businesses positioned around emerging trends and scalable growth opportunities.
Margins, Capex and New Opportunities
Management said raw-material-price changes are passed through with a one-to-three-month lag and that the company is negotiating pass-through of freight and other inflationary costs. Happy Forgings aims to sustain margins around FY26 levels through a favourable higher-realisation product mix, improved scrap realisation and operating leverage.
The company has planned Rs 6,500 million of capex for heavy-forged components. This includes Rs 1,500 million for high-horsepower tractor axle and wind components, Rs 3,000 million for fungible hammer-forging capacity, and Rs 2,000 million to Rs 2,500 million for machining capacity for data-centre genset components.
Management cited confirmed orders of Rs 3,000 million annually through 2033 for the data-centre genset machining opportunity. Happy Forgings has also secured a Rs 800 million test order from a global large-engine manufacturer while pursuing the North American commercial-vehicle market.
Earnings Estimates and Valuation
ICICI Securities forecasts revenue of Rs 19,158 million in FY27E, Rs 23,161 million in FY28E and Rs 27,803 million in FY29E. It estimates EBITDA margin to rise from 30.5 per cent in FY27E to 32.0 per cent in FY29E, while EPS is projected at Rs 39.3, Rs 49.5 and Rs 61.5 respectively.
| Metric | FY27E | FY28E | FY29E |
|---|---|---|---|
| Revenue | Rs 19,158 million | Rs 23,161 million | Rs 27,803 million |
| EBITDA margin | 30.5 per cent | Not specified | 32.0 per cent |
| EPS | Rs 39.3 | Rs 49.5 | Rs 61.5 |
The unchanged target price of Rs 2,450 is based on 40 times FY29E EPS, reflecting expanding capabilities and end-market opportunities.
Key Downside Risks
- Weaker-than-expected domestic commercial-vehicle or farm growth.
- Delayed recovery in European and US commercial-vehicle and farm markets.
- Delayed order execution.
- Failure to win new orders, particularly for recently announced heavy-forging capex.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
