The shares of the high-precision machined components manufacturer gained up to 5 percent after the company’s board approved Rs 650 crore investment to expand its forging capabilities.
With a market capitalization of Rs 9,451.58 crore, the shares of Happy Forgings Ltd were trading at Rs 1,003.30 per share, increasing around 0.92 percent as compared to the previous closing of Rs 1,012.60 apiece.
Reason for rise:-
According to the company filing, Happy Forgings Ltd has approved a capital investment of up to Rs. 650 crores to establish advanced forging capabilities to serve the non-automotive industrial segment. This new facility will be the first of its kind in Asia and the second largest globally.
Furthermore, the company’s capex investment targets heavy forged and machined components like crankshafts, axles, gears, valves, spindles, and shafts. These will cater to non-automotive industries such as power generation, marine, mining, wind energy, oil & gas, aerospace, defense, and nuclear sectors.
Additionally, the company’s investment will expand forging capabilities to produce components up to 3,000 kilograms, targeting the non-automotive industrial segment. With capital expenditure spread over 2–3 years, funded by internal accruals and debt, production is set to begin by FY2027, reinforcing HFL’s leadership in forging and machining.
Financial analysis:-
Looking into Happy Forgings Ltd’s performance, revenue increased by 5 percent from Rs 343 Crore in Q2FY24 to Rs 361 Crore in Q2FY25. During the same duration, net profit increased by 29 percent from Rs 55 crore to Rs 71 crore.
Operational Performance
The company’s machining capacity grew to 57,000 metric tons, with a new press of 6,300 tons. It plans further increases in H2 FY25. Direct exports grew by 5%, while the CV segment achieved 2% growth. The passenger vehicle segment is expected to rise with new North American EV deliveries.
Strategic Insights
The company is diversifying revenue across industries and geographies to reduce market cyclicality, focusing on gaining share in new businesses and expanding wallet share with existing customers. It is entering the wind sector, portable gensets, and ring forging, aiming for 8-10% revenue growth in two years.
Management Comment:-
Despite market challenges, including a 7% year-on-year decline in domestic truck production and a 12-15% sales drop projected for European CV OEMs in 2024, management remains optimistic. They plan to maintain growth and market share by focusing on high-quality products to sustain margins of 27%-29%.
Future Growth Projections
Management expects medium-term revenue growth of 15-18%, driven by new projects and businesses, with the industrial segment growing from 12-13% to 18-20% of revenues in 2-3 years. Planned capex for FY25 and FY26 is Rs 200-250 crores, focusing on machining capabilities and new product lines.
Company Profile:-
Happy Forgings Limited makes automotive components. The company manufactures and markets steering knuckles, front axle beams, bevel gears, counter shafts, and transmission components.
Written by:- Abhishek Singh
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