Summary
Happy Forgings Limited - Q3 FY 2026 Earnings Call Summary Tuesday, February 10, 2026 11:00 AM
Event Participants
Executives 2 Ashish Garg (Managing Director), Pankaj Kumar Goyal (CFO)
Analysts 8 Aniket Mhatre, Akash, Joseph George, Mihir Vora, Mitul Shah, Nitin Agrawal, Preet Pitani, Sahil Sanghvi, Vijay Pandey
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹391 crores | +10.4% YoY; All-time high quarterly performance driven by domestic volume growth. |
| Volume | 12,467 MT | +13.8% YoY; Strong uptick in domestic CV, Farm, and Passenger Vehicle segments. |
| Gross Profit | ₹230 crores | +12.2% YoY; Gross margin at 58.9% (+100 bps YoY) due to better product mix and lower RM costs. |
| EBITDA | ₹120 crores | +18.7% YoY; Record margin of 30.8% (+210 bps YoY) driven by operating leverage. |
| Profit After Tax (PAT) | ₹79 crores | +22.3% YoY; PAT margin at 20.2% aided by operational efficiencies. |
| 9M FY26 Revenue | ₹1,122 crores | +6.2% YoY; Consistent performance despite global macro headwinds. |
| 9M FY26 PAT | ₹218 crores | +11.8% YoY; Adjusted for tax/one-offs, reflecting resilient profitability. |
| Cash Flow from Ops | ₹315 crores | 9M FY26 figure; Strong cash generation supported by efficient working capital. |
| Liquid Assets | >₹400 crores | Total treasury cushion providing flexibility for internal accrual-funded capex. |
Geographic & Segment Commentary
- Commercial Vehicles (CV): Contributed 37% to 9M revenue. Domestic growth of ~22% was supported by GST rate cuts and infrastructure activity, while North American/European export markets saw a 10-12% decline.
- Farm Equipment: Represented 33% of 9M revenue. Successful domestic growth was driven by favorable monsoons and rural cash flows, while international markets remained range-bound.
- Industrials & Off-Highway: Industrials (14% of revenue) grew 2% in volume, supported by power gen and wind energy. Off-highway (11% of revenue) faced weakness due to slower domestic project awards and global category softness.
- Passenger Vehicles (PV): Contributed 5% to 9M revenue. This segment saw a significant 37% YoY growth, with management expecting contribution to scale meaningfully through new export programs.
Company-Specific & Strategic Commentary
- Capacity Expansion: Increased machining capacity to 68,000 MT (+9,800 MT) in Q3; commissioning a 10,000-ton forging press in Q4 FY26 and a 4,000-ton press in H1 FY27.
- New Business Wins: Secured incremental peak annual business of ~₹800 crores starting FY27, with two-thirds oriented toward exports and focused on Industrial/PV segments.
- Heavy Component Capex: Progressing toward high-horsepower crankshaft manufacturing; ₹180 crores in signed orders currently awaiting facility completion in FY28.
- Renewable Energy Initiative: Signed long-term lease for 80 acres for a captive solar plant; expected to reduce annual power costs by ₹25-30 crores starting Q3 FY27.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| EBITDA Margin | 28% - 32% | Targeted range over the medium term; fluctuations expected based on RM and product mix. |
| FY26 Total Capex | ₹400 - ₹500 crores | Includes heavy component lines and general capacity augmentation. |
| FY27 Capex | ~₹480 crores | Includes ~₹80 crores for the solar project; focused on reaching 150k MT forging capacity. |
| Export Revenue % | 15% - 16% (USA) | Expected to double from current 7-8% levels over next 2-3 years via new PV/Industrial programs. |
Risks & Constraints
| Risk | Context |
|---|---|
| Export Market Softness | Ongoing weakness in North America and Europe CV/Off-highway segments may delay volume recovery despite new order wins. |
| Raw Material Volatility | Alloy steel prices are expected to rise by ₹3-4/kg in upcoming settlements; while pass-throughs exist, they operate with a 1-3 month lag. |
| Trade Tariffs | Uncertainty remains regarding the fine print of India-U.S. trade agreements (Section 232), though management views India as competitively advantaged over China/Brazil. |
Q&A Highlights
Margin Sustainability
- Question: What led to gross margin improvement despite realization dips? (Preet Pitani)
- Answer: Growth was driven by a shift in product mix toward higher value-add components and the fact that raw material price declines outpaced realization adjustments (Ashish Garg).
Order Book Detail
- Question: Can you provide a breakup of the ₹800 crore new order book? (Vijay Pandey)
- Answer: The mix is 44% Industrial, 27% CV, 24% PV, and 4% Farm. Approximately 80-85% of this will be executed within the next 20 months (Ashish Garg).
US Tariff Impact
- Question: How do the new US tariffs affect competitive positioning? (Nitin Agrawal)
- Answer: India is at an advantage as competitors like China and Brazil face duties up to 50%. Most company contracts place duty responsibility on the customer (Ashish Garg).
Capacity Roadmap
- Question: Where will capacity stand by the end of FY27? (Joseph George)
- Answer: Forging capacity will reach 150,000 MT and machining 82,000 MT. By FY28/29, forging will hit 180,000 MT including heavy components (Ashish Garg).
Key Takeaway
Happy Forgings delivered a record-breaking Q3 FY26, achieving its highest-ever quarterly revenue of ₹391 crores and a peak EBITDA margin of 30.8%. Performance was anchored by a 22% value growth in domestic CV and Farm segments, offsetting a 10-12% decline in direct export markets. Strategically, the company is pivoting toward higher-margin Industrial and Passenger Vehicle segments, backed by an ₹800 crore incremental order book and aggressive capacity expansion to 150,000 MT forging. Management successfully maintained a debt-free growth profile, funding a ₹400-500 crore FY26 capex via internal accruals while boosting cash reserves to over ₹400 crores. Despite global macro uncertainties and potential steel price hikes of ₹3-4/kg, the company is well-positioned for a shift in export dynamics starting H2 FY27, supported by a new captive solar plant that will significantly lower operating costs. Forward momentum remains tied to the ramp-up of international PV programs and the commissioning of heavy component lines by FY28.
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