MM Forgings Q4 Results Review - Inexpensive Valuations Provide Favorable Risk-Reward: ICICI Direct

ICICI Direct Report

MM Forgings Ltd. posted a steady performance in Q4 FY23. Standalone revenue was at Rs 372 crore, up 3.4% QoQ. Ebitda margins were at 17.5%, down 86 basis points QoQ, amid higher overhead costs, partially mitigated by ~85 bps QoQ gross margin expansion.

MM Forgings consequent profit after tax de-grew ~10.5% sequentially to Rs 30.3 crore. Tonnage in FY23 was at 72,500 and guidance for FY24E is pegged at 90,000.

Key triggers for future price performance:

• Robust growth outlook with company guiding for ~Rs 1,800-2,000 crore as sales for FY24E and ~Rs 2,500 crore in a year or two thereafter amid cyclical upswing in domestic commercial vehicle space, new product development, rise in wallet share with existing clients, new client addition and foray into electric vehicle components.

• Sales at Mumbai metropolitan region are seen growing at a compound annual growth rate of 18.2% in FY23-25E, amid tonnage CAGR of 17% to ~1 lakh tonne by FY25E (~72,500 tonne in FY23).

• Operating leverage gains, greater machining mix to push margins to 18.8% by FY25E with consequent return on equity, return on capital employed seen healthy at ~19%, 14%, respectively, in FY25E.

• Trades at inexpensive valuation of ~11 times price/earning, ~7.8 times enterprise /Ebitda on FY25E.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.