MM Forgings sees India and US CV demand driving margin-led earnings growth

Investment View and Valuation

Anand Rathi Research’s August 19, 2026 result update on MM Forgings retains a BUY rating and raises the target price to Rs840 from Rs600. At the report CMP of Rs680, the stock traded at 22 times FY27E EPS and 17 times FY28E EPS.

Anand Rathi values MM Forgings at 21 times FY28E EPS, compared with 16 times previously. This represents one standard deviation above the company’s 10-year average valuation multiple. The revised target follows EPS estimate increases of 4.5 per cent for FY27E and 7.1 per cent for FY28E, reflecting the DVS merger and higher revenue and margin assumptions.

Q1 FY27 Financial Performance

MM Forgings reported Q1 FY27 standalone revenue of Rs4,197 million, up 16.2 per cent year on year and ahead of Anand Rathi’s Rs3,900 million estimate. Domestic revenue grew 20 per cent, while exports rose 9 per cent. Within exports, the United States grew about 31 per cent and South America about 16 per cent, whereas Europe declined about 4 per cent and other markets declined about 42 per cent.

Other operating income increased 42 per cent year on year to Rs106 million. EBITDA rose 18.6 per cent to Rs750 million, exceeding the broker’s Rs659 million estimate due to stronger-than-expected gross margin, other operating income and the DVS merger. EBITDA margin was 17.9 per cent, up 40 basis points year on year but down 110 basis points sequentially, and above the 16.9 per cent estimate.

Adjusted PAT rose 82.8 per cent year on year to Rs354 million, compared with Anand Rathi’s Rs199 million estimate. The increase was supported by operating outperformance and a 2.5 per cent tax rate versus 30.5 per cent a year earlier. The lower tax rate reflected Rs61 million of adjustments for earlier years.

Following NCLT approval on June 29, 2026 for the merger of wholly owned DVS Industries, a machined-crankshaft subsidiary, MM Forgings restated past numbers.

Management Outlook and Capacity Expansion

Management expects FY27E revenue of about Rs18,000-19,000 million, or around 18 per cent year-on-year growth. It expects FY27 volume of 90,000 tonnes, following 20,200 tonnes in Q1 FY27.

• Management cited strong demand across commercial vehicles, passenger vehicles and tractors in India, optimum utilisation of forging and machining lines, and strong United States growth led by Class-8 demand.
• The company targets an EBITDA margin of 20 per cent through productivity, automation and scale, although higher Tamil Nadu electricity tariffs are expected to create pressure.
• A 4,000-tonne press has been commissioned, while the 16,500-tonne press is expected to be commissioned in Q4 FY27.
• Abhinava Rizel’s first-order start of production has begun.

Growth Drivers and Earnings Outlook

Anand Rathi forecasts revenue and EBITDA CAGR of 16 per cent and 22 per cent, respectively, over FY26-28E. The outlook is driven by an expected 8 per cent CAGR in domestic medium and heavy commercial vehicle volumes, an overseas commercial-vehicle recovery on a low base, order wins and pre-emission-norm buying.

Further catalysts include new products such as gear blanks, long shafts and larger crankshafts; passenger-vehicle crankshaft capacity rising to 50,000 from 40,000 units; use of the 16,500-tonne press; and a higher machining and heavy-forging mix.

The broker expects the machining mix to rise from 54 per cent in FY26 to 65-70 per cent over the medium term, lifting EBITDA margin from 17.8 per cent in FY26 to 19.8 per cent in FY28E. Annual capex of around Rs1,800 million is expected over the next two years for machining expansion and new products. Installed capacity was 146,000 tonnes at about 48 per cent utilisation in FY26.

Key Risks

• Muted growth in underlying segments.
• Delayed order execution.
• Higher raw-material prices.
• Adverse foreign-exchange movements.