MM Forgings- May shape the portfolio in the right way

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MM Forgings Q4FY23 Concall Summary

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MM Forging Limited reported consolidated sales of INR 1475 crores for FY23, with a sales tonnage of 72,000 tons and production tonnage of 76,000 tons. The company’s export sales grew by approximately 9% year on year, while domestic sales showed significant growth of around 65%.

The company is focusing on the domestic market and expects to see continued traction in that segment. In the export market, there may be some slowdown, but MM Forging anticipates that it will be offset by customer wins, increased product launches, and expanding within existing customer relationships. The company’s export performance is dependent on a favorable global economic environment.

Looking ahead, assuming a benign recessionary environment globally, MM Forging estimates sales of around 90,000+ tons and INR 1,800 to INR 2,000 crores for the next year. However, if global economic conditions deteriorate, the company may adopt a more conservative approach.

In response to specific questions during the conference call, Mr. Vidyashankar Krishnan, the Vice Chairman and Managing Director of MM Forging Limited, shared the following insights:

  • Class 8 truck demand is expected to remain range-bound in the next year despite the implementation of new carb emissions standards, which could lead to an increase in Class 8 prices.
  • Domestic commercial vehicle (CV) demand is projected to grow between 5% and 12% in the coming year, with a range of expectations from conservative estimates of 5% to optimistic estimates of 12%.
  • Raw metal costs have increased due to changes in the product mix and a focus on the domestic market. However, this increase is not related to feed prices.
  • Power and fuel costs have risen slightly, mainly due to increased unit prices from the electricity board. Fuel prices are expected to remain capped at current levels unless there is a significant slowdown in the global economy.
  • MM Forging plans to expand its presence in the passenger vehicle (PV) market in India by supplying products that they haven’t previously provided to this sector.
  • Revenue Breakdown for FY23:
    • Commercial Vehicles (CVs): 78%
    • Passenger Vehicles (PVs): 12-13%
    • Off-Highway and Others: Balance (8.5% achieved in off-highway segment)
  • Revenue Growth Outlook for FY24:
    • Targeting close to 25% growth compared to FY23 (from around 72,000 to 90,000 tons)
    • Incremental growth is expected from both CVs and PVs
    • PVs will have a substantial contribution, but their relative size in the sales pie will remain lower than CVs
  • Market Share and Domestic CV Growth:
    • Expecting market share gains in domestic CVs
    • Launching new products in both CV and PV segments to drive growth
  • Export Contribution and Outlook:
    • Export contribution in FY23 was 34% (compared to 48% in FY22)
    • Outlook for exports in FY24 is expected to be flattish, around 30-35% of overall sales
    • Expecting some improvement in export growth numbers compared to the current year
  • Capex Plans:
    • Planned capex of INR 500 crores for the next two years
    • Majority of the capex (around INR 250 crores) to be spent in the current year, with the balance next year
  • Non-Auto Segments:
    • Currently focused largely on the automotive space
    • Handling inquiries and considering orders in the non-auto segment, but no specific plans for expanding into the railway sector mentioned
  • China Plus One Strategy:
    • Benefitting from the China Plus One strategy adopted by other forging companies
    • Gaining market share due to the strategy, but long-term threats exist due to US regulations on value add in the domestic market
  • Revenue Growth Target for FY24:
    • Feasibility of achieving 20-25% revenue growth based on decent macroeconomic environment, new product launches, products developed in previous years, and better capacity allocation and utilization
  • Export Geographical Breakdown:
    • India: 65% of sales
    • Europe and US: Roughly 15% each
    • South America: About 5-6%
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MM Forgings KTA:

  1. Volume - Will do 19000 tonnes in FY24 from 17k tonnes.

  2. Guidence - 1800 to 2000 cr topline in FY24 with similar EBITDA margins.

  3. Export outlook is sluggish.

  4. Debt will be 750 cr by the end of FY24 FROM 650 cr.

https://twitter.com/Alazyinvestor13/status/1677946010411364355?s=20

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MM Forgings - Q1 FY24 - Concal. I attended.

:arrow_forward:Guidance :-
https://twitter.com/AnirbanManna10/status/1691083350591639552

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