RKFORGE - ramkrishna forgings Ltd. Share Price

Outlook by Management:
Ramkrishna Forgings Limited (RKFL) anticipates sustained growth driven by strategic diversification, capacity expansion, and robust order momentum. Despite moderated Commercial Vehicle demand, management remains optimistic about accelerating growth in FY26, supported by new customer wins, product pipelines, and non-auto segment expansion.

Key Highlights:

1. Growth Drivers:

   • Diversification: Expanding into two-wheelers, passenger vehicles, and non-auto sectors (mining, oil & gas, railways) to reduce reliance on CVs.
   • New Orders: Secured Rs.697 crore orders in Q3 (non-auto: mining Rs.600cr, oil & gas Rs.54cr, railways Rs.43cr), with a cumulative order book of ~Rs.3,900cr over 4 years.
   • Capacity Expansion: Adding 25,000 MT cold forging (operational Jan 2025), 40,000 MT hot forging (July 2025), and 30,000 MT casting (April 2025). Targeting 80% utilization by Q4 FY26.

2. Segmental Growth:

   • EV Focus: Aluminum forging facility (3,000 MT) in Jamshedpur to cater to EV demand.
   • Trailer Axles: Aiming to double sales in FY26 (Q3 revenue: Rs.28cr).
   • Global Expansion: Mexico operations (strategic hub) secured $5M orders; targeting North American market.

3. Financial Guidance:

   • Volume Growth: Targeting 15% YoY for FY26, supported by new capacities.
   • Margins: Gross margin improvement expected via value-added products; EBITDA impact temporary (Mexico setup costs).
   • Leverage: Maintains stable credit rating (CRISIL AA) with manageable debt (Rs.1,500cr consolidated net debt).

4. Operational Updates:

   • ACIL Subsidiary: Expected to turn profitable in Q4; targeting Rs.200cr revenue in FY26.
   • Casting Plant: Machined castings (Rs.150/kg realization) to drive revenue from FY26.

5. Market Resilience:

   • Export Strategy: Hedging 50-60% forex exposure; Rs.20cr net gain in 9M FY25.
   • CV Recovery: Optimistic on H2 CY25 demand post-elections and budget allocations.

Management remains confident in balancing growth across automotive and non-auto verticals while scaling profitability through operational efficiencies and higher-margin offerings.

Question 1: Sir, my first question is with respect to slide 41 where we have shown almost 50% increase in installed capacity by end FY25. I just wanted to understand, based on the current demand environment plus the new business order that you expect, by when can we see the optimal utilization of this incremental capacity? And if you can throw more colour in terms of granularity, from this segment, how do you look at this utilization?
Answer: The incremental capacity (Cold Forging, Casting, and Mexico facilities) is expected to achieve ~80% utilization by Q4 FY26. Growth drivers include new automotive orders (PV, two-wheelers) and non-auto segments (mining, railways). Volume growth is projected at ~15% YoY for the next two years.

Question 2: Sir, my question was, over 2 years can we assume that utilization can happen? Because it will not happen at one go, right? Once you start, have the capacity say by March 25, it will take some time for it to stabilize and then ramp it up.
Answer: Utilization will be staggered. Cold Forging (25,000 MT) and Hot Forging (40,000 MT) will commence shortly, with 80%+ utilization for casting (30,000 MT) targeted by Q4 FY26. RKCSL's 18,000 MT forging capacity will begin production in Q4 FY25.

Question 3: And sir, last question, if I can, or a suggestion, sir. Now that our focus is on consolidated performance and the share of standalone is likely to keep on reducing in overall scheme of things, in the presentation, if you can figure out a way of giving a consolidated volume data, operational volume data, it would be helpful, sir.
Answer: The management acknowledged the feedback and agreed to explore including consolidated volume data in future disclosures.

Question 4: Nareshji, can we get a status on the ACIL unit, like are they operational or what's the status?
Answer: ACIL (Manesar plant) is now profitable as of Q3 FY25, with revenue expected to rise to ~Rs.30 Cr in Q3 (vs. Rs.16 Cr in Q2). FY26 revenue is projected at Rs.200 Cr+, driven by approvals for two-wheeler and farm equipment components.

Question 5: The Jamshedpur unit? Wanted to get the status on the new unit of Jamshedpur plant? What is the scene over there of Plant No. 8?
Answer: The Jamshedpur casting plant (30,000 MT) will commence operations in April 2025, targeting 70% utilization by Q3 FY26 and 85"“90% by Q4 FY26. Realization is estimated at ~Rs.150/kg, with strong order visibility.

Question 6: Sir, there is a big fall in our export volume sequentially. Is it largely because of the auto side, CV side?
Answer: The Q3 export decline reflects seasonal factors (15-day holiday in December) and cyclical adjustments. Exports grew 9.5% YoY in 9M FY25, driven by auto demand.

Question 7: Sir, can we get a little bit more color on the new order book which you talk about some Rs. 600 Crores plus which is non-auto?
Answer: New orders worth Rs.697 Cr (executed over 4 years) include Rs.600 Cr (mining/earth-moving exports), Rs.54 Cr (oil & gas), and Rs.43 Cr (railways). These align with capacity expansions in non-auto segments.

Question 8: Sir, trailer axle, how much has it contributed to the run rate etc?
Answer: Trailer axle revenue was Rs.28 Cr in Q3 FY25. Sales are expected to double in FY26, driven by market acceptance and product launches.

Question 9: Sir, is it possible that you can give us the breakup of revenue segment like how much was from the commercial vehicle, passenger vehicle, non-auto, etc.?
Answer: Detailed segment-wise revenue breakdown (auto vs. non-auto) is provided in the presentation. Further granularity (PV, CV) is challenging due to overlapping product categories.

Question 10: Sir, I wanted to check on what is your long-term view on like exports, like what is your target especially coming from the auto sector in the export segment?
Answer: Exports (37.8% of revenue in 9M FY25) will grow via new automotive orders and non-auto diversification. Realization remains stable due to pass-through clauses for raw material prices.

Question 11: Sir, great set of numbers. Congratulations. Only one question I have. If you can help us understand the cost saving initiative which we had taken by onboarding a consultant.
Answer: Cost-saving initiatives are ongoing, with benefits expected to reflect in FY26 P&L. Current expenses include one-time costs (e.g., Mexico setup, Hanover fair).

Question 12: Just one quick question, I wanted to understand between Q2 and Q3, on a consol basis EBITDA did not really grow a lot, like what's happening on a quarter-on-quarter basis, like why is it not growing?
Answer: Q3 EBITDA impact included Rs.12"“13 Cr inventory hit (steel price decline), Rs.7 Cr labor cost hikes (minimum wage revision), and Rs.6 Cr one-time Hanover fair expenses. Margins will improve in Q4.

Question 13: Sir, net debt number by the end of the quarter?
Answer: Consolidated net debt stood at Rs.1,500 Cr (vs. Rs.1,240 Cr guided for FY25). Elevated working capital (due to Red Sea delays) will normalize by FY25-end.

Question 14: Sir, INR depreciation. How does it help us? When does the benefit start flowing in P&L?
Answer: INR depreciation led to Rs.20 Cr net forex gain in 9M FY25. Gains are partially offset by import costs and customer price adjustments. Hedging covers 50"“60% of exports.

Question 15: Sir, CAPEX number for '25 would be Rs. 650 odd Crores, which last time you had guided, or will it change?
Answer: FY25 CAPEX remains ~Rs.650 Cr (including casting plant). FY26 CAPEX will be minimal, as major expansions conclude by July 2025. FY27 will see renewed capacity additions.