Happy Forgings Limited (HAPPYFORGE) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q4NFI26 Earnings Conference Call of Happy Forgings Limited. As a reminder, all participant likes will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal on operator by pressing star-than-zero on your touch-tone phone. Please note that this conference is been recorded. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. I now hand the conference over to Mr. Ashish Garg, Managing Director, Happy Forging Limited. Thank you and over to you, sir.

Good morning, and a very warm welcome to all of you to Happy Forging's Limited quarter four FI26 earnings call. With me, I have Mr. Pankaj Kumar Goyal, CFO of the company, Strategic Growth Advisors, our Investor Relations Council. I trust everyone has had the chance to review our financial statements and investor presentations for quarter four and FI26, which we have filed with exchanges. Let me start by outlining the key highlights for FI26. F526 was another milestone year in our journey, reflecting the strength of our business model, disciplined execution, and strategic focus on value-added growth. Over the last few years, we have steadily transformed the company through capacity expansion, higher machining mix, operational efficiency, and a sharper focus on profitable growth, and F526 is a strong reflection of that journey. During this year, we deliver our highest ever annual profitability with revenues of 1546 crores, beta margins at 30.4%, expanding by approximately 160 basis points, and pack margins at 19.5%, improving by approximately 90 basis points year-on-year on an adjusted basis. Quarter 4 FY26 was equally encouraging with sales growth of around 20% year-on-year and EBITDA and PACT growth of approximately 30% and 24% respectively. This resulted in our best ever quarterly performance across key parameters supported by strong execution, better product mix, and operational leverage. Gross margins, EBITDA margins, and PACT margins for the quarter stood at 59.4%, 31.5%, and 19.7% respectively. Our finished goods volume grew by 11% during the year, while realizations remained broadly stable at 245 per kg despite softening raw material prices. This reflects the strength of our customer relationship, product portfolio, and increasing share of value-added products. In recent months, we have seen some increases in raw material prices and in other manufacturing costs due to ongoing U.S. earnings. As per existing arrangements, we expect the raw material increases to be passed on to the OEMs. We are also in active discussions with the customers regarding inflation in our other manufacturing costs and remain hopeful of cost recovery. Commercial vehicle continue to remain our largest segment, contributing 37% of FI26 revenue. The domestic segment witnessed healthy momentum during the year, supported by improving affordability. While following GST rationalization, sustained infrastructure spending, healthy freight activity, and improved free utilization. Industry data indicates strong mid-teams growth in domestic MSCV, truck production, and sales volume in FY26. Another domestic segment growth was in line with that. Domestic industry outlook for FI27 remains stable with expectations of continued replacement demand and infrastructure-led growth. However, global markets, particularly North America and Europe, reported 9% to 10% decline in unit sales and also led to single-digit decline for us as well in our export-dependent CV segment sales. Farm equipment contributed 52% of our total operating revenue in FI26, growing around mid-team range during the year for us. The domestic practice industry demonstrated strong growth during the year, supported by favorable monsoons, healthy reservoir levels, improved rural cash flow, and strong agriculture output. Industry volumes also benefited from increasing mechanization trends and improved affordability. Export markets declined further during the period. Export markets in Europe and U.S. are expected to remain broadly stable in calendar year 2026, and the long-term structural outlook for the industry remains positive, even India has relatively low farm mechanization levels and rising adoption of higher horsepower tractors. The industrials contributed 14% of our operating revenue and delivered stable performance during the year in line with our overall growth. Demand remains. Healthy across power generation, renewable energy, wind energy, railways, oil and gas, and digital infrastructure, the broader capital goods and industrial ecosystem continue to remain strong, supported by increasing government and private sector capital. Investments in renewable energy, transmission, and grid infrastructure, rail modernization, and India's rapidly expanding data center ecosystem are expected to continue rising demand. Off-highway contributed 11% to our operating revenue amid broader categories, weakness, the domestic off-highway segments saw softness on a year-on-year basis, slower project awards, particularly in roads and highway and other infrastructure segments, along with land acquisition, approval-related delays moderated the pace of project execution. This impacted equipment demand during the period and led to a 7% decline in domestic construction equipment sales. Industry conditions in Europe and U.S. remain challenging during this period with a marginal decline from prior years. Passenger vehicles contributed 6% to our total revenue in FI26. We have strong visibility on incremental business in this segment and expect the contribution to scale up meaningfully over the next few years in this segment. While the domestic business is witnessing stable growth, the export market segments across TV, farm and off-friway is weathering challenges and may stabilize during the year and has some moderate signs of recovery. During the quarter four, up at 26, we did see a higher share of export business, indicating early signs of demand pickup. One of the important strategic developments in our business has been the increasing diversification of our order pipeline. We are seeing growing opportunities in industrial passenger vehicle, EV-linked programs, and export-oriented businesses. This will gradually reduce dependency on traditional cyclical segments and create a more balanced and resilient portfolio over the medium-time. Our continued focus on the value addition is also reflected in the product mix. Machining contribution increased to 89% in FI26 compared to 87% in FI25 and 73% in FI21. On the capacity side, we expanded machining capacity to 68,000 metric tons during the year, including an addition of 9,800 metric tons in quarter-free FI26. We also commissioned a new 10,000 tonne forging line during quarter 4 of FY26, while the 4,000 tonne press is expected to be commissioned in the first half of FY27. These investments are aligned with the strong business opportunities we see ahead. When we look back at our journey from FY21 to FY26, the transformation has been significant. Over this period, finished goods volume grew by 1.8x, revenue grew by 2.6x. Udita increased by 3x and PAT grew by 3.5x. Alongside growth, we improved margins, strengthened the balance sheet, reduced debt, improved working capital efficiency, enhanced return ratios. Importantly, this growth has been funded through healthy internal cash generation, with cash generated being almost equal to cumulative capex over the period. We have a double-rated stable credit rating, which is among the strongest ratings in the industry for a company of R-scale that is not backed by a large conglomerate, which reflects the strength of our balance sheet, government standards, and financial discipline. Our strong balance sheet and cash generation capacities provides a significant headroom to fund our growth without relying excessively on external capital. Looking ahead, our outlook for FF27 remains optimistic. We expect late-team volume growth for the business while maintaining EBITDA margins broadly in line with upper 26 levels. While global uncertainty and input cost inflation continue to remain near-term challenges, we believe our strong customer relationship, diversified portfolio, and operational strength position as well to navigate the environment effectively. Further, as part of our long-term optimization and ESG strategy, we have signed a long-term lease of 80 acres of land to develop a captive solar power plant. We further have got approval that enables us to enhance our capacity of the proposed plant by additional 10 AC megawatt to 35 AC megawatt, with a total capacity outlay of up to 170 crores. This initiative is expected to reduce our annual power cost significantly, with partial benefits starting from FI28 and full benefits growing thereafter. Overall, we believe we are well positioned for the future, supported by the high capacity, improved product mix, strong customer relationship, healthy balance sheet, and a clear strategic roadmap for growth. With that, I would like to invite our CFO, Mr. Pankaj Margoel, to take you through the detailed financial performance for the quarter. Thank you.

Thank you, Ashish. Good morning, everyone. I hope I'm audible to everyone. Let me now take you through the key financials and operational highlights for the fourth quarter and the full year-end FY26. We delivered a strong operational and financial performance during the year, reflecting the resilience of our business model and discipline exhibition. For Q4 FY26, revenue from operations stood at 422. While the full-year FY26 revenue came in at 1,546, this translated into a strong year-on-year growth of 20.4% for the quarter and 9.8% for the year. On the operational front, we recorded robust volume of 20.6% in the Q4 FY26 and 10.9% for FY26 on a year-on-year basis. The relations remained stable both for the quarter and the full-year at around 245 per case. Gross profit for the quarter stood at 252 crore, while for FY26 is 915 crore, registering a year-on-year growth of 21.9% and 11.9% respectively. Consequently, gross margin increased to 59.4% for the C4 FY26 and 59.1% for the full year by 70 basis points and 114 basis points respectively. A beta for Q4 FY26 came in at 133 crore, reflecting a strong growth of 30.4% of YOY. For FY26, A beta stood at 471 crore, up by 15.7% YOY basis. A beta margin improved at 31.5% for the quarter and 30.4% for the full year. That is why 240 basis points and 157 basis points for the quarter and full year respectively. supported by operating leverage and continued focus on operational efficiencies. Other income for Q4 FY26 came in at 6 crores versus 10 crores in Q4 of previous year. Other income for the full year was 31 crores, similar to that in FY26, excluding one time insurance income. Other income was affected by roughly 4.5 crores in Q4 because of adverse foreign exchange moments. Paid for Q4 FY26 stood at 84 crore, affecting a strong growth of 23.6% YOY. For FY26, Paid stood at 302 crore, up 14.8% YOY on an adjusted basis. Paid margins improved to 19.7% for the quarter and 19.5% for the full year. Thank you. Continues to remain a key pillar of strength for the organization through focused working capital management and discipline execution. We have maintained stability in working capital levels relative to 5.25. The reduced working capital intensity coupled with an expanding margins profile enables strong cash flow conversion during the year, resulting in cash flow from operation of approximately 4.45 per 5.26. Further, our treasury position has strengthened meaningful. With total liquid assets of around 430 crore, this provides us with significant financial flexibility and tuition as well to fund future growth initiatives through internal accruals. We also continue to invest with a long-term perspective. Our ongoing CAPEX program is progressing as planned with a CAPEX of around 460 crore deployed during FY26. Looking ahead, we expect total CAPEX for FY27 to be in the range of 450 to 500 crore.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the test on telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question is from the line of Pankaj Tibriwal from Ikigai Asset Managers.

Please go ahead.

Good morning, Ashish and good morning, Pankaj. First of all, congratulations on good number one.

Sorry to interrupt, Mr. Pankaj. May we request you to move a bit closer to the microphone?

Yeah, can you hear me now?

Yeah, please go ahead.

Yeah. First of all, congratulations on good set of results and great to see the balance sheet and cash flow discipline. And year on year, the cash flow generation was extremely good. So congratulations on that. Ashinji, what I wanted to understand is that after many quarters, we have seen this growth come back. Can you just help us understand that you talked about late teens growth on volumes? At least with that, there will be some steel price inflation. What are the projects which we are doing over the next two, three years? How the size and shape of the company will look like? What are the new areas we are entering into? Can you just give us some color on the growth side which will help us, you know, think about the company in a better way? Over the next two, three years, what is the size and shape looking like?

So, thank you, sir. With regards to the business and momentum, so you see from the last quarter, in the last quarter, in the last four months, we were able to acquire another 140 crores of new businesses across various sectors, largely on industrial side, which is towards the data center business, and also towards the passenger vehicle business. So, we see that, you know, the journey for the PVs and the industrials will continue very strongly in the next two to three years. Accordingly, infrastructure is being created. And accordingly, we have a strong order book. The order book for the new businesses today stands at nearly 950 crores, which will be executed in the next two to three years. And accordingly, infrastructure is getting built. Which is a very strong diversification point. Even on the CV side and on the farm equipment side, especially on the CV side, we expect a large market share gain starting from this year as a lot of development has been done for domestic as well as global commercial vehicle manufacturers. So, put together all this, we see a market share gain. This year, starting from this year, and also the new segmental growth on industrial as well as TV will be a major growth driver going forward for next two to three years. And if you look at the mix, the mix will change to a decent level where, you know, we will have commercial vehicle contributing around 27% going forward. And, you know, you can see there is a complete shift which will happen from around currently around 37%. And at the same time, we expect industrials to be a large part of the business. We will be around 30-31% from 11% right now. As a passenger vehicles, we expect improvement from 6% to almost 10% going forward. So these are the major changes we see. And accordingly, you know, infrastructure development is being done right now. And product mix, currently, if you see the product price, largely the product price that we today cater is around 60,000 rupees. We are working on the projects where the product price is around 25 lakh. Starting from currently the heaviest component we do is roughly around 200 kg, and going forward we are talking about 2 tons. So that's kind of a transformation shift we are talking about.

That's great to hear. The second question is that when you look at last year, there were headwinds from export side because of tariffs and because of many other reasons. How do you see the export visibility this year across your segments and are there any new wins both on automotive and industrial side? Can you share some detail with us how you're looking at the export front this year? Thank you.

So, we expect we started some of the projects for North America, for which we have already started ramping up. Large part of the business will start coming from second quarter onwards for North America. These are for past-bar sectors, and we have further gained more programs, one more program with the same client, which is going to start from FI28 onwards. That's on the TV side. On the industrial side as well, we have gained a large order from Europe. And the commencement of that will at least start from FY29 onwards. So, the export sector for the new and for the existing clients, as we see, as per the company and as per the recent commentary, we are seeing that, you know, should grow this year by single digit, by mid-single digit this year. And inventories are more or less aligned and should be a decent year in terms of exports to Europe, in terms of, you know, which is our main contribution today. Also, on the industrial side and with currency favoring, we see export segment will grow as there is a lot of opportunity coming from Europe at this point of time.

Great. Thank you. Thank you, Ashiji, and wish you and your team all the very best. Thank you. Thank you.

The next question is from the line of Sahil Sangli from Monarch Network Capital. Please go ahead.

Good morning, and again, many congratulations for outstanding results. Is this continuing on the previous participant? What kind of price hikes are you asking from your customers in terms of percentage? Would it range in roughly 5% to 7% covering the raw material inflation and the other input cost with logistics or any kind of manufacturing cost?

So, in terms of, you know, if you look at our cost structure, because we are into a very high-value-add product, and steel is a pass-through for us on the domestic side with one-month lag, and on the export side with a lag of one quarter. So, we are not worried about the steel price pass-through. With regards to the cost, there is the cost increases on the side of fuel. So, 7% today constitutes power and fuel, and 1% is fuel for us. And on the fuel side, if you see, you know, we have seen 30 to 40 percent hike because LPG and fuel costs have gone up. But if you look at the total picture, it is just 1% of our cost. So we can see that around 0.3, 0.4% cost increases on the fuel side. With regards to the other manufacturing expenses, there are certain freight hikes and hikes on account of carbide consumption and other packaging materials for which company is in discussion. So besides the steel price, we are expecting around 3.5 to 4% increase on selling price. From our customers, for which our teams are in discussions, we are already, we have received confirmation from a few organizations. We are hopeful to get it from first of April.

Got it. Got it. That's helpful. And this, the numbers that you've given on the new orders received or the order book now with having the new orders, that includes the heavyweight forging also, right? I mean, That includes the? Heavyweight forging that we are mentioning.

Yes, so out of 950 croads, 250 croads of order books is currently on the heavy businesses related to data center, and which is currently in a range of 700 kgs to 1.8 tons.

Got it, got it, got it. That's helpful. Well done, well done by your team. Thank you.

Thank you. Thank you. The next question is from the line of Vijay Pandey from Access Capital. Please go ahead.

Hi, sir. Thank you for taking my question. Congratulations for the excellent set of numbers.

Sorry to interrupt, Mr. Mishai. May we request you to move a bit closer to the microphone?

Is it okay now?

Yes, please. Go ahead.

So, congratulations on an excellent set of numbers. So, a couple of questions, first on the... So, cost inflation and energy inflation, are you seeing any impact in the current quarter, and are you, like, how is the negotiation with the OEMs going in terms of the price increases?

So, as just explained, with regards to the cost types, you know, you can see that 60%, you know, for us is a gross margin. And if you look at the manufacturing cost, around 7% is power and fuel. For power, there is no hike for us. Fuel is 1% of the cost, where the cost hike is there by almost 35-50%, which is 0.3-0.4% of the sales value. And there are other manufacturing-related costs. which have gone up by 2.5% of revenue, which are regarding the carbide prices, packaging goods, and freight, etc. And for this, we are in touch with our customers, and we have confirmations received from our customers to pay it out from 1st of April. So that has been in discussions. I think another 10-15 days, we should be having confirmation from 70-80% of our customers on this, where PO amendments will start. So, that's how we are looking at it. Plus, there is an improvement in scrap prices, which will also support us in the current scenario.

Okay. Okay. Thank you. That's good to remember. Secondly, how is our export demand looking? So, given the entire scenario, the geopolitical scenario, but there was an expectation that the Europe demand should improve this year. So, I just want to get an idea how it's looking for you and for the industry as well.

So the export demand is robust, I must say, and the programs which were done in the last two years are taking good shape and are in good demand right now. The ramp-up is projected to happen as per the timeline, and we are working with OEMs on the same. So there is no delays. In fact, you know, we are pushing hard to ramp up for all these projects. So that is the condition today. And we are not seeing any delays on the current projects. As far as demand from our existing customers are concerned from the European markets, the demand is expected to improve by around single digit this year. At the same time, we see a lot of new projects from Europe. Because of the currency depreciating, there are a lot of benefits to European OEMs. And because of the gas pricing surging in Europe makes a lot of business competitiveness from India at this point of time. So that has been in discussions, and we expect because before we were able to generate new order book of almost 150 crores per annum. And we can see a very fast change happening in terms of the new businesses which are coming to us.

Okay. Thank you, sir. Lastly, sir, so we have previously also you had given us a little bit feedback about the new CapEx. Just if you can highlight what is its status, how they're progressing, and what should we expect, like, from when we can expect the revenue and potentially what can be the peak revenue from that business.

So, there is a capex which is going on the 10,000 and forging press line, which was already done in last year before, for which major sectors that will cater will be CV, farm, and industrials, which is in line with the growth. And there is another 4,000 and press line, which is starting by first quarter, which is expected to start very soon, which is kind of dedicated for the PASCA sector. For which we have large otters in hand, which is also going well in advance. There is one capex which is done on the wind side, especially for the wind pinion shafts, which is also in line, which is also starting from second quarter, for which also there is a good otter box in hand. And by F527, by end of F527, we expect... To complete our large capex, which is inclined towards the data center and heavy engine requirements, and for which the trials will start in early FI28 and should start expecting businesses from quarter 3, quarter 2nd, quarter 3 of FI28. It's largely the machined businesses with the realization of almost 800 to 1,000 rupees a kg, and there is a testing period required, and that's expected to start from third quarter of FI28.

Okay. Okay. Okay. Thank you. I found the best. Thank you.

Thank you. The next question is from the line of Mihir Vohra from Aquarius Securities Private Limited. Please go ahead.

Yeah. Thanks for picking my question. So, sir, basically one question here is we see a very strong margin improvement over last few quarters now. And even despite our PV mix increasing and, you know, CVs and farms staying stable, some more color we are into what kind of product or what realization here are we going into which is driving this sort of a margin growth because it is on to the gross margin front we have seen an improvement. So some color on that front like what new initiatives or what products are being added here.

So, sir, the PV businesses and the industrial businesses, which are growing fast, if you see, and also some of the new CV programs that we have taken are at higher realization, which is kind of driving the entire gross margin. And the businesses, you know, if you talk about the 950 crore, the businesses which are in hand today, if you look at the realization for those businesses, it comes out to 340, 350 rupees a kg. And today we are averaging around 240, 245. So, we expect that on a medium-term basis, this gross margin, you know, improvements will happen because of the businesses in hand, and the businesses are far more complex in terms of its tolerances and in terms of its requirements. So, that is how we see this overall picture on the gross margin side, improving going ahead.

Right. And do we, in the new products which we have entered here into PVVs or industries, do we see some kind of market share gains further which will happen into that driven by, you know, our sort of right to win in terms of capability.

So PVs with one of our large customers, we were at around 32% market share, which has improved from 32% to 47% from this financial year. We are ramping up for this customer. We have added one more line. And even on the CV side, we expect a good market share improvement in this year as we have started working with, we have started large invoicing for, you know, CV, large CV player, domestic CV players. So this is there on the, you know, market share side. And we expect this improvement to continue as there are other programs also starting in Q4 for the same OEMs.

Great. Okay. So just secondly, something which is sort of a broader set here. Our domestic CV leader has now, you know, acquired a company in Europe. And basically, still it is too early to say, but do we see this kind of, you know, they will, you know, sort of shift some supply for the European components to India? What kind of broader growth, like in a four-year, five-year period? Do we expect some kind of traction from that as well?

Can you come once again with your first question?

So, what I am saying is that the leading CBOEM, basically Tata, they acquired a company in Europe. And now, basically, in that sense, do we see an opportunity here in a 3-4 year down the line period when the company shifts from Europe?

So, it will be, that can happen. The discussions are ongoing. But it will be too early to say whether Tata Motors will be handling the sourcing for them. So it will be too early to say. But yes, discussions are on.

Okay. So finally, the KPEX outlay will continue to be in this range at the 400 crore mark for next year.

Yes, just a second.

So, next two years, the planned CAPEX will be in the range of 800 crores.

Okay. Okay.

And this includes the CAPEX on the solar side as well.

Okay.

Okay. Okay, sir. That's all from my side. Thank you.

Thank you. The next question is from the line of Jai Prakash Kumar from Corman Capital. Please go ahead.

I have a question on the margin, but it got a little bit cleared with the last question. But just clarity, the current one you are selling at 30 to 45 rupees, you said in the order book of 950 crores has a realization of 340 to 300, almost 10x increase in realization.

Did I hear that correctly? So our current realization is at Rs.245 a kg.

And the new businesses with Rs.245 a kg is our current realization, whereas the new businesses in hand have a realization of between Rs.345 to Rs.350 a kg. Okay. So roughly around Rs.90 to Rs.95 per kg is the difference between the new businesses in hand and with the existing business, which also contains the legacy Orch business.

Okay. Okay. Okay. Got it. So, it means that basically the current level of margins... Code improve going forward, right? Because realizations are higher, or are there any other costs because the precision might be higher? Is there any additional labor costs or anything which is involved in comparing down the margins, or it's just higher realization means, automatically means?

Oh, high realizations, and we are working more towards the technology components, and it's a high precision requirement. So manpower is not a major issue in this, because on heavy components, the cycle things are more. The gross margins will definitely improve, and it should have positive impact on the beta margins as well. So, that's on the medium term outlook, you know, as we can see that the businesses in hand have a better realization. Even if you see in this year, the contribution, the gross contribution has remained same despite raw material prices falling by almost 6% reduction was there in the raw material prices. Even despite of that, the realization has been similar, you know, to last year, which has probably helped us in, you know, improving our EBITDA margin.

Thank you, sir.

Thank you. The next question is from the line of Akash from NVAlphaPMS. Please go ahead.

Thanks for the opportunity.

Sir, clarification required on the 950 crore order book that you announced at the new order that we have in place. So that kind of order book is executable in how much time?

This is within two and a half to three years period.

Understood. Because I think last time this order book was around 800 odd crores and I think the batch was given a longer timeline.

No, it was FI 27, 28, 29.

Understood. Okay. And the realizations that you mentioned, the average realization on this new order book of around 340-350, that will include the orders for the new plant as well, right? Where we have realizations of almost 700-800 per kg, right? Yes.

Understood.

Yeah. So, secondly, sir, I wanted to understand what has been our growth on the TV side in value and volume terms. Like, have we grown in market share this year?

Just a second. So, on the Q4,

the domestic growth on the CV side was almost 27%, and on the PV side, it was around 35%. On the export side, there was a degrowth on the CV side by almost 25%, and off-highway domestic, there was a degrowth of 6%. Industrials grew by almost 32% on the domestic side.

Understood, sir. Sir, our industrials as a share hasn't grown. If we look for FI26 versus FI25, I think even on absolute as well as absolute terms, we haven't grown that significantly. Relatively, I think we have gone down 1%. I think 12% was the contribution last year. This time it's around 11 odd percent. So, I think we had some orders, new orders, which are going to start for data center players, smaller data center players. So, that has started or is it still stuff due to the tariff and all of that?

So, the projects that were there was not

for data center, it was for heavy engine, which is ongoing. And if you look at HFL growth on the industrial side, the domestic has grown almost 59%, whereas exports were down to almost 11% this year. For industrial? Yes, for industrial.

Oh, I understood. Okay.

Understood. Yeah, the last question on the solar capex, I think, are we already done with it, or what is the timeline for, you know, having our solar plant ready?

We should start generating from Q4 onwards, and next year, potentially, we should be having 70 to 80% of the benefit for which we have already in the middle of the capex right now.

I understand. That's great, sir. All the best.

Thank you. The next question is from the line of Maitrisha from Sapphire Capital. Please go ahead.

Yeah, hello, my wonderful. Hello.

Yes, please go ahead with the question.

Yeah, good morning. Just two questions. Firstly, on the capacity addition. So, if you could help me out by the end of this year and end of fiscal 28, what sort of capacities will have on the forging and the machining side?

Forging capacities in the last year have ramped up from 145,000 to 147,000, which is further expected to go up to 161,000 by FI27, and further it will be enhanced to 187,000 tons, for addition of almost 26,000 tons from FI27 to FI28.

Okay, and on the machining side?

Machining side, the capacity will improve from 69,000 tons to 82,000 tons by FF27, and from 82,000 tons to 87,000 tons by FF28.

And this heavy engineering section that we are building up, the capacity for the data centers and heavy engine orders, so all these data center orders, these 200 quads, will be executed post-3QF by 28, or there will be some executions happening over the next six, seven quarters?

We'll start a new keeping from third quarter FF 28.

Okay, thank you. And any targets for FI28, what sort of volumes are you expecting, and how do you see the margins kind of inching up with these higher value orders coming in place?

I don't want to give any specific number to it, but on the overall vision of the businesses, which we have in hand, as already discussed, as the gross margin will improve, which will definitely have a positive impact on the overall EBITDA margin.

Yeah, that is what I say. Thank you.

Thank you. The next question is from the line of Ronak Mehta from ICICI Securities. Please go ahead.

Yeah, hi. Thanks for the opportunity. Congratulations, Ashish and team, for a good set of numbers. My question is, depending on the CV export,

did I give the fact that this quarter your CV export declined in double digits?

Ronald, we have major exports coming from, CV exports coming from Europe, not from North America. So for us, the visibility on order books is good, and we are seeing single-digit kind of growth from these European players this year. And so, any plans to cater to North America in senior OEMs?

Because what we hear from others, it appears that the cycle is looking pretty good this year. So, any plans to cater to those OEMs?

We have started working and quoting some RFQs, and we have a dedicated team sitting in North America for marketing now. So, we will be working in that direction as well.

Perfect. Thank you. Thank you so much.

Thank you.

The next question is from the line of Pratik Sivastav from Nivesh Visham. Please go ahead.

Yeah. Hello, sir. Again, sir, congratulations on a great set of numbers. You know, your margins are increasing. You're able to pass through the increase in deal prices. You're gaining market shares. So everything, we are doing good. The only thing I think that we are missing out is on this data center. So we are seeing that the data center at NEI infrastructure boom is happening right now in FY27. So is it possible to sort of fast track this CAPEX and because, you know, Q3, FY28 looks little late. So what are your thoughts on this?

So the programs that we have and where we have to cater in, these companies are setting up complete plans to cater to these requirements. These infrastructures are not available, you know, right now. The growth which is expected to come from 28 to 35 is enormous. And accordingly, as we discussed, most of these large companies are creating infrastructure. Because ultimately, these shafts, these products will go in large engines. These large engines will go in large engines. This is a complete requirement. You know, even if we move very fast. You know, it depends because, you know, it's the infrastructure needs to be in place, which most of these OEMs are created. So we are working hard to, you know, create the infrastructure. We are expecting that Baskin core will be ready. But then that's, you know, there is a development lead time and the testing lead time is expected as well. Which will take, you know, six to nine months, you know, to start our activities in terms of our revenues. But infrastructure-wise, by Q4, we will have most of the infrastructure in place.

Got it. And do we have some sort of MOU, some sort of early agreement with any of these data center players who we are working or closely collaborating with?

So, we will be working overhead with large engine companies that manufacture large gensets for these data centers, and we already have good visibility from these companies. And being a new player in this sector, some OEMs we are in discussions and are also waiting for infrastructure to be in place. So, we already have a good order books, and there is some investments already done by these OEMs with us in terms of the development of tool costs and other related activities. So, that commitment is there.

Oh, great. Okay, sir. Okay, sir. I'm looking forward for the, you know, next quarterly call, and maybe if you can, you know, throw more light on this in terms of, you know, the partnerships, early, you know, trials, things like that on

this heavy machinery data center.

Thank you, sir. Thank you. The next question is from the line of Lakshmin Anayan from Tunga Advisors, LLT. Please go ahead.

Yeah, thank you. Two questions. I just want to understand what is the contribution of Grandshaft in the overall business for FI25 and how is that for FI26? And the capacities which you are setting up, are we planning to increase the throughput of Grandshaft in particular?

Thank you. Contribution is nearly 50%, I can say, between FY25 and FY26.

Okay.

And that remains the same for the two financial years or it went to an increase?

I just want to understand, with respect to the previous year, or something like that?

Yeah, from previous year, it was flattish, but, you know, if we look at, you want to understand, going forward, it will improve, we have a sheet made on this, it is going up to 58 to 60% by FY20, A29.

And in terms of the commercial vehicle automobiles, I understand that there is a decline in these heavy commercial vehicles, or there is a trend towards tractor-trailer, which means that the requirement of axles may be changing. Is that true, and does it actually positively or negatively impact us?

So, sir, front axle beam is something that we started late in the industry, and because of this change, we have taken up some latest programs on the new axle beams. The reverse to crankshafts, we are a very large player on the CG side where we are working and there is no change on those sides. Some of the new developments are happening on 9-liter and 10-liter applications on the domestic side and with major players in the industry, we are already there. So if the ramp-up will happen for the new set of engines, we already have our products tested for that.

And in terms of the new products or the new wins that we have got in this year, is this a resultant of completely new products, or is it that we have actually displaced a competitor, and so what is the proposition of us to displace a competitor?

So, sir, some are PV programs and PV is a new segment for us, which we started two and a half years back. So, all these products are new for us where we have been part of the new growth, which is coming in. And also on the export side, you know, some of these products were done in-house by some of the large OEMs, which they no more are investing in-house. So, there is an opportunity to supply. As far as the other data center-related businesses, there's definitely a growth which is coming in. On the domestic side, on the CV businesses, the market share is improving for us, and over there, we're definitely working on improving our market share.

Is it because any other player are vacating a particular product segment, or is it that your proposition is stronger than the income?

Thank you. So, you see, in the last five, six years, we have invested very heavily on the friendship side of the business, which has played well for us. In terms of technology, we are ahead, and there is a lot of new investments that has done in the past couple of years where OEMs have started working with us two to three years back, which is kind of helping us, you know, gain our market share.

Got it. Thank you.

Thank you. The next question is from the line of Nishant Chauhan from Induscent Nippon Life. Please go ahead.

Yeah, hi, I'm Aadabhi.

Yes.

Okay, thank you. So firstly, on the farm equipment segment, I would like to know whether this segment is largely export-oriented or we cater to domestic players?

Yes, hello.

So farm equipment is largely domestic for us, but we are also working on some programs on the European farm and North American farm sites. So next two years, we'll also have exposure improving on the farm site, but currently it is largely domestic. And we also have indirect exports, which is happening for farm transmission parts, but it is largely domestic.

Okay, so this year, particularly, I think, farm segment has seen a quite impressive growth of, you know, 20% plus, whereas if the ICR farm numbers, it would be something around, say, 10%-ish. So, is there scope for us to get more market share in this particular segment, or how should we see it?

So, over here, we are expecting we were working on some new programs. And definitely, this year, we are expecting some improvement on the market share side. And so, to start reflecting, so the work is ongoing. There is a replacement and there were some developments that I've done in the last year. So, should be in a position to do better this year in terms of our market sharing on the farm side is concerned. And also, on the capacity side, we have invested in the last year on two crankshaft machining lines also on the farm side. So, we expect the utilization levels will improve on those lines.

Okay. And, sir, finally, I think your volume guidance of high teams for this particular year is for tanker agent. But, sir, just if you could, you know, give us slightly more details and with segments should we look. Oh, which would be contributing to the growth quite heavily. Because I think farm and TV science outlook, even by most players, is something around flattish to maybe mid single digits. So how would you break up this high teams kind of a growth guidance that you've given us?

So, for our product range, we are currently at 32% market share on the CV side, which we expect to go to 42% on the MHCV side. So, simply on the market share, this is, you know, we expect good growth. So, CV alone, we are expecting almost 35-40% growth this year for us because of the new programs and the new ramp-ups, which is ongoing. On the farm equipment side, we expect market share to improve by almost 4%. We are currently at 41%. We should improve to around 45%. So, simply on the basis of market share, I am discussing. So, yes, you know, as of now, the FADA numbers report signals a good, you know, start, because April, if you see the FADA report for tractor, it was like 23% up for farm equipment sector, and MHCV, it was close to 15%, where XCV was 8%, and MCVs were almost 27%. So, also the pipeline inventory for both these sectors are fairly low at this point of time, which gives a good signal in terms that the production should continue.

Okay. So, a high factor to 40% growth in seaweed is expected to see, segmentized.

Thank you. Can you come again? Yes, thank you.

Thank you. Ladies and gentlemen, we'll take that as the last question of the day, and I now hand the conference over to the management for closing comments.

Thank you, everyone, for joining. To conclude, we are confident that our investments in innovation capacity and customer partnerships will drive sustainable growth and value creation. With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries for any further information. Finally, get in touch with strategic growth advisors, our investor relations advisors. Thank you once again.

Thank you. On behalf of Happy Forgings Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.