View Full Version : MM Forgings Ltd (NSE:MMFL) (BSE:522241)

08-06-2015, 09:20 AM
MM Forgings Limited is an India-based company, engaged in manufacturing forging components. The Company manufactures steel forgings in raw, semi-machined and fully machined stages in various grades of carbon, alloy, micro-alloy and stainless steels in the weight range of 0.20 kilograms to 60 kilograms. The Company caters to the forging requirements of almost all sections of industry.

Official Website: www.mmforgings.com

08-06-2015, 09:21 AM
For 1QFY2016, MM Forgings (MMFL)’ numbers have come in below our estimates. The top-line for the quarter declined marginally by 0.3% yoy to Rs124cr. The same was below our estimate of Rs144cr. The EBITDA during the quarter declined by 3.0% yoy to Rs27cr and the EBITDA margin witnessed a decline of 59bp yoy to 21.6%, which is below our estimate of 22.7%. Although the raw material cost declined by 546bp yoy to 39.3% of sales, the benefits were offset by an increase in employee cost, power costs and other expenses. Employee costs, power costs and other expenses rose by 275bp yoy, 154bp yoy and 176bp yoy to 11.4%, 11.0% and 16.8% of sales, respectively. Consequently, the net profit declined by 2.4% yoy to `13cr vis-ŕ-vis our expectation of Rs16cr. Sufficient capacity to cater to improving demand across the globe: MMFL is in the midst of increasing its capacity to 65,000MT, which should be in place by 4QFY2016. The company mainly caters to global markets (Europe and USA) with a focus on the commercial vehicle (CV) industry. The company is witnessing healthy demand from USA and we expect demand from the region to remain intact over the next 12-15 month period. We expect demand from Europe to be subdued in the near term and recover thereafter. Additionally, appreciation of the USD against the INR will provide a boost to the company’s top-line by way of higher realization in INR terms. Improvement in demand from domestic CV industry: The domestic CV industry’s performance over the past three years has been lackluster amidst a pronounced slowdown. However, there has been an evident recovery in the domestic CV industry, ie in the medium and heavy commercial vehicle (MHCV) segment, where vehicle sales have grown by ~27% in the past six months. Going ahead, the outlook on the domestic CV industry remains positive on the back of increase in government spending on infrastructure coupled with stable diesel cost and possible interest rate cuts in the near future. Outlook and valuation: We expect MMFL to register a revenue CAGR of 15.5% over FY2015-17E to Rs671cr with an EBITDA margin of 22.9% in FY2017E. The profit is expected to improve to Rs80cr in FY2017E. At the current market price, the stock is trading at a P/E of 9.9x its FY2017E earnings. We have a Buy rating on the stock with a revised target price of Rs797 based on target P/E of 12.0x for FY2017E.

Source: http://www.angelbroking.com/