MMFL - M.M.Forgings Ltd. Share Price

Management Outlook and Major Points:

• Financial Performance (FY24): Turnover reached INR1,585 crores, slightly below the INR1,600 crore guidance due to a weak Q4. Exports grew 10-15%, domestic sales 4%, maintaining a 35-36% export share. EBITDA margin improved to 19.4%, with a target to surpass 20% by Q3 FY25.

• FY25 Growth Projections:

  • Volume: Target production of 92,000"“95,000 tons (vs. 85,000 tons in FY24), with sales growth of 10-12%.
  • Domestic: Expects 5-7% market-led growth (CV sector) + 3% from market share gains, driven by front axle beams, knuckles, and crankshafts.
  • Exports: Resilient demand in the Americas and Europe, with new orders offsetting broader industry softness.

• Margins: Targeting 20%+ EBITDA margins via cost optimization (tools, labor, energy), better product mix (precision machining), and value-added offerings. Machining mix (57% in FY24) aims to rise to 62-65% in FY25.

• Capex & Expansion:

  • INR500 crore investment over 12-14 months: INR425 crore for core forging/machining capacity (+20,000 tons), INR75 crore for EV motors (targeting INR100 crore revenue initially).
  • EV motor line (up to 60kW) operational by June 2024, with trials underway for PV/OEMs.

• Market Conditions:

  • India: H1 FY25 expected to remain subdued; H2 recovery post-elections.
  • Global: Slowing North American Class 8 truck demand offset by inventory restocking and Europe's "China+1" sourcing shift.

• Challenges: Rising power costs in Tamil Nadu (5% annual hike) and higher interest costs (INR65 crore vs. INR45 crore in FY24) to be mitigated by operational efficiencies and green energy initiatives.

Key Focus Areas: Scaling EV motor segment, boosting machining share, and reducing inventory by INR50"“100 crore in FY25.

Question 1: Can you share what are the sales targets for FY '25, sir? And what are the volumes in terms of sales and production for FY '24, which is gone?
Answer: FY24 production was ~85,000 tons, with sales at ~77,000 tons. FY25 targets include production of 92,000"“95,000 tons and sales growth of 10"“12%, driven by domestic and export markets.

Question 2: We guided about the exports to go 10% to 15%. There is a possibility for industry to see a decline. So, still we see a good growth over the industry. So, what should drive the growth, sir?
Answer: Export growth will be driven by new orders, increased wallet share with existing customers, and expansion in key geographies (Americas, Europe).

Question 3: On the domestic side, sir, how do you see, I mean, the outperformance over industry?
Answer: Domestic growth (~10%) combines market expansion (5"“7%) and market share gains (3%) via heavy forging demand for components like beams, crankshafts, and knuckles.

Question 4: Any products you want to mention, sir, which new products we are focusing on, sir?
Answer: Focus remains on heavy forgings: front axle beams, knuckles, and crankshafts.

Question 5: Can you provide an update on the appeal of results, sir? How are the trials for the PMS and motors going, sir?
Answer: Abhinava Rizel (EV unit) is investing INR75 crore in FY25; motor production (up to 60 kW) starts by mid-June. Revenue target: INR100 crore initially, with commercial orders expected soon.

Question 6: On the margin side, improvement reasons?
Answer: Margin improvement (19.4% EBITDA) stems from cost control, favorable raw material prices, and better product mix. Targets 20%+ EBITDA by Q3 FY25.

Question 7: What would be the machining mix now and in the next few years?
Answer: Machining contributed 57% of FY24 sales; target is 62"“65% in FY25 and ~75% long-term through precision-machined, value-added products.

Question 8: Suvarchas Vidyut performance and outlook?
Answer: Current performance is subdued; targeting double-digit revenue (INR10+ crore) via alternator approvals and new product launches.

Question 9: Revenue mix by geography and segment?
Answer: India (65%), Europe (16%), North America (12%), South America (7%). Segment mix: CV (81%), PV (10%), off-highway (9%).

Question 10: Why hasn't machining mix improvement boosted margins?
Answer: Lower realizations in domestic machining vs. exports and operational inefficiencies. Cost compression and value-added products to drive future margin gains.

Question 11: Power cost trends and mitigation plans?
Answer: TN's 5% annual power tariff hike to pressure costs. Plans to expand green energy (solar/wind) for 10 crore units/year, improving EBITDA by ~150 bps.

Question 12: Non-auto forging opportunities?
Answer: Exploring non-auto segments but prioritizing smaller, profitable orders. Historical non-auto share was 28"“35%; renewed focus required.

Question 13: Abhinava Rizel's revenue timeline?
Answer: Significant revenue expected by FY26"“27. Current focus is prototype testing (75,000 km+ validation) and customer approvals.

Question 14: Consolidated vs. standalone performance discrepancy?
Answer: Subsidiaries underperformed due to weak tractor sales. Improvement expected from Q2 FY25.

Question 15: Interest cost guidance?
Answer: FY25 interest cost to rise to ~INR65 crore (vs. INR42 crore in FY24) due to INR500 crore capex (partly debt-funded).

Question 16: Tractor market outlook?
Answer: Monsoon-dependent; OEs lack clarity. Hopeful for H2 recovery post-election stability.

Question 17: Dividend policy?
Answer: Target payout ratio of 15"“20%, subject to profitability and capex needs.

Question 18: Capex funding mix?
Answer: INR500 crore capex (FY25"“26): INR300 crore from internal accruals, INR200 crore via debt.

Question 19: Inventory/receivables increase?
Answer: Built inventory anticipating stronger Q4. Aiming for INR50"“100 crore reduction in FY25.

Question 20: North American Class 8 truck market outlook?
Answer: Weakness persists but expected to recover by Q4 CY24. Low customer inventories support order momentum.

Question 21: European orders amid China+1 strategy?
Answer: Rising interest in non-China sourcing; quick order conversions observed. Opportunities growing in Europe.

Question 22: EV motor capabilities and prospects?
Answer: In-house PMSM motor design expertise (up to 300 kW); targeting e-axle solutions. Long-term potential for INR1,000"“2,000 crore revenue.