Release Date: June 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MM Forgings Ltd (BOM:522241, Financial) reported a turnover of INR1,585 crore, close to their guidance of INR1,600 crore.
- EBITDA margins improved to 19.4%, with expectations to cross the 20% mark by the end of the calendar year.
- Strong growth in exports, with an increase of 10% to 15%, and a 4% growth in the domestic market.
- Investment of around INR500 crore planned for the next 12 to 14 months to enhance capacity and growth.
- Positive outlook for the Indian market in H2, with expected growth of 10% to 12% overall for the year.
Negative Points
- Q4 FY24 was tepid, leading to a shortfall in the expected turnover.
- The American market is slowing down, which could impact export growth.
- Increased power costs due to Tamil Nadu government's policy to raise prices by 5% annually.
- Interest costs are expected to rise from INR45 crore to around INR65 crore.
- Challenges in the non-auto segment, with smaller ticket sizes and the need for more focus on profitability.
Q & A Highlights
Highlights from MM Forgings Ltd (BOM:522241) Q4 FY24 Earnings Call
Q: Can you share the sales target for FY25 and the volume of sales and production for FY24?
A: We achieved 84,800 tons of production in FY24 and are targeting 92,000 to 95,000 tons for FY25. Sales-wise, we did 77,000 tons, which is broadly in line with our expectations.
Q: What is driving the growth despite the industry seeing a decline?
A: Growth is driven by new orders and increased wallet share across significant export geographies.
Q: How do you see the growth in the domestic sector?
A: We expect around 10% growth, with 5% to 7% from market growth and an additional 3% from improved market share, particularly in H2.
Q: Can you provide an update on the trials for PMSM motors and the expected revenue potential from the INR75 crore CapEx?
A: We are investing over INR75 crore in Geneva Rizal for motors, with the line expected to be ready by the end of June. We anticipate initial revenue of around INR100 crore.
Q: What has driven the improvement in EBITDA margins over the last three quarters?
A: The improvement is due to a combination of cost focus, better raw material prices, and an improved product mix.
Q: What is the revenue mix by geography and product segment for FY24?
A: India accounts for 65%, Europe and America each at 13%, and South America at 7%. In terms of product segments, CV is 81%, PV is 10%, and the rest is off-highway.
Q: How do you plan to fund the INR500 crore CapEx?
A: About INR300 crore will be funded by internal accruals and INR200 crore through additional borrowings.
Q: What is the outlook for the automotive and tractor industries?
A: The outlook is positive, especially if the monsoon is good, which will benefit the tractor market.
Q: What is the dividend policy going forward?
A: We aim for a dividend payout ratio of around 15% to 20% of EBIT, subject to Board approval and immediate requirements.
Q: How do you see the impact of the China Plus One strategy on your orders?
A: There is a significant trend of customers moving away from China, leading to increased orders from European customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
