Happy Forgings Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

2 Ashish Garg, Pankaj Kumar Goyal

Analysts

7 Arjun Khanna, Daksh Prashar, Jay Shah, Krisha Kansara, Mihir Vora, Pankaj Debreval, Senthilkumar Natarajan

Financials & KPIs

Geographic & Segment Commentary

Commercial Vehicles (33% of revenue): Healthy single-digit growth; domestic business up ~18% supported by infrastructure activity, freight movement, and replacement demand, outpacing industry production growth of ~10%. Exports declined ~12% due to geopolitical transit delays (DDP terms to Europe/Turkey), resulting in higher inventory in transit and lower sales conversion.

Farm Equipment (32% of revenue): Mid-20s growth with domestic up over 20% on favorable demand. Exports grew despite challenging US/EU demand—subdued tractor markets due to low farm incomes, high interest rates, weak commodity prices, and deferred purchases.

Industrial (16% of revenue): ~50% growth across domestic and export. Demand healthy across power generation, renewable energy (including wind), railways, oil & gas, and digital infrastructure. Management expects continued tailwinds from grid infrastructure, railway modernization, and data center ecosystems.

Off-highway / Others (11% of revenue): Over 40% growth across domestic and export; domestic construction equipment grew ~9% supported by healthy road/highway project awards.

Passenger Vehicles (8% of revenue): Growth of more than 70%—domestic up over 50% on healthy market demand and increased wallet share; export revenue more than doubled as previously secured export orders began executing.

Company-Specific & Strategic Commentary

Price Revisions: Successfully negotiated price increases with OEMs after 3 years—2% captured in Q1 (~30% of total), remaining ~4.5-5% to fully reflect from Q2 onwards, with permanent benefit.

Order Book Diversification: ₹950 crore order book split roughly 35-40% industrial, 25-30% passenger vehicles, 25-30% commercial vehicles, with 60% export share. Order book dominated by complex precision engineering, value-added products with superior realizations.

Heavy Forging Line (250 kg to 3 tons): World's second-largest line, now 65-70% utilized on 14,000-ton press; 18,000-ton vertical press trials from Q3, operational from Q4 FY27. Quoting parts worth ₹28-30 lakh apiece (1.8 tons) for energy and data center sectors; expected meaningful contribution from FY29.

Solar Power Project: Captive solar on-stream from January (Q4 FY27); expected to add ~1-1.5% to EBITDA margin from FY28.

M&A / Partnerships: Open to acquisitions or JVs in energy and aerospace for technology and metallurgy know-how, but cautious on simple businesses given expensive valuations.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Growth Trajectory & Margin Sustainability

• Question: What gives confidence in the 2-3 year growth trajectory, and can the industry-leading margins hold? (Pankaj Debreval, IKIGAI)
• Answer: All sectors performing; diversification into industrials/PV and ₹950 crore order book provide confidence. Complex new products (high horsepower crankshafts, exports) carry higher realizations; price increases taken from a ~3-year-old base will help sustain margins going forward. (Ashish Garg)

Price Revision Impact Timing

• Question: Does the price settlement benefit come entirely from Q2? (Arjun Khanna, Kotak MF)
• Answer: ~30% of the benefit came in Q1; domestic price increases of ~2% captured in Q1 out of ~4.5-5% negotiated; remaining passes through from Q2. The increase is permanent, not a one-quarter adjustment. (Ashish Garg)

Solar & EBITDA Margin Outlook

• Question: Solar timing and can 30%+ EBITDA margin be sustained? (Arjun Khanna, Kotak MF)
• Answer: Solar on-stream from January (Q4 FY27); clearances done, right-of-way work in progress, most capex complete. Expected 1-1.5% EBITDA benefit from power; confident of sustaining 30%+ margins. (Ashish Garg)

CV Segment Export Decline & Freight Costs

• Question: Why did CV grow only 7% vs double-digit industry, and how are container cost increases being managed? (Mihir Vora, Equirus)
• Answer: Domestic grew ~18% vs ~10% industry production; exports declined ~12% due to geopolitical transit delays of ~one month on DDP contracts to Europe/Turkey. Container costs up to ~$6,000 from ~$2,000; ~75% pass-through with recovery of ~$4,500, leaving 15-20% incremental cost to absorb. (Ashish Garg)

Export Mix by Segment

• Question: Can you provide export revenue split across segments? (Mihir Vora, Equirus)
• Answer: Passenger vehicles ~63% of exports, industrial ~9%, commercial vehicles ~7%, farm equipment ~5%; Europe accounts for ~60% of exports. (Ashish Garg)

Capacity Utilization & 18,000-ton Press

• Question: Utilization on the 14,000-ton press and timing of the 18,000-ton line? (Senthilkumar Natarajan, Joindre Capital)
• Answer: 14,000-ton press is 65-70% utilized on industrial and CV; ~30% open capacity backfilled with new orders; shifting components to the 10,000-ton line frees heavy capacity. 18,000-ton line trials from Q3; operational from Q4 FY27. Inventory days at ~50 as on June 2026, with improvement in working capital days. (Ashish Garg)

Order Book Breakup

• Question: Can you give the ₹950 crore order book split by end-user industry? (Krisha Kansara, Molecule Ventures)
• Answer: Industrial ~35-40%, passenger vehicles ~25-30%, commercial vehicles ~25-30%, others including off-highway and farm; roughly 60% export and 40% domestic. (Ashish Garg)

New Heavy-Line Margin Profile

• Question: What are the standalone plant-level margins for the new heavy forging line? (Krisha Kansara, Molecule Ventures)
• Answer: Realizations high—gross margins ~80-85% on full-machined components, ~60-65% on forged crankshafts on the high horsepower category; roughly 50% of gross margin translates to EBITDA. (Ashish Garg)

Long-term Shape, Funding, and M&A

• Question: How large can export and PV become, and what is the acquisition appetite? (Pankaj Debreval, IKIGAI)
• Answer: Industrial expected to double from current levels in 3-4 years; PV to reach 12-15% of revenue; combined industrial+PV ~45-50% of revenue. Growth will be funded largely from internal accruals, with possible bridge loan for LC-related needs. Open to acquisitions/JVs in energy and aerospace for technology and metallurgy (e.g., titanium grades), but cautious on simple businesses given expensive valuations. (Ashish Garg)

Capex Impact on Asset Turns

• Question: With capex peaking by end-FY27, will asset turns trough at FY28 start amid high sector bases? (Jay Shah, Genuity Capital)
• Answer: Not worried about temporary six-month asset-turn dip—capacity is built for the future; growth would be impossible without installed capacity. Customer acquisition in PV is just beginning (currently only 2-3 customers). Industrials is a very large sector with multiple sub-segments (data center, energy, mining, wind), not a single cyclical base. (Ashish Garg)

Key Takeaway

Happy Forgings delivered its strongest-ever quarter in Q1 FY27 with revenue of ₹449 crores (+27% YoY), EBITDA margin of 31.3% (+275 bps), and PAT of ₹91 crores (+39.2%), powered by 23.1% volume growth, realization improvement to ₹253/kg (+3.2%), and a successful OEM price revision (~4.5-5%) that will fully reflect from Q2. Growth was broad-based—domestic CV +18%, farm equipment mid-20s, industrial ~50%, PV >70%—with export momentum only temporarily hit by geopolitical transit delays and a tripling of container costs (largely pass-through). Management maintained FY27 high-teen volume guidance with margins "broadly in line with FY26, with potential for improvement," and expects 18,000-ton press commissioning by Q4, captive solar on-stream from January, and meaningful contribution from the heavy forging line (250 kg-3 tons) from FY29. The ₹950 crore order book (60% export, 35-40% industrial) supports medium-term targets of industrial doubling and PV reaching 12-15% of revenue. Key watch items: geopolitical transit/logistics normalization, freight cost recovery, US/EU farm equipment demand, and asset-turn trough expected by FY28 start.