Happy Forgings - Expanding Product Spectrum Augurs Well: Yes Securities

Yes Securities Report

Highlights of Happy Forgings Ltd. plant visit and management interaction

1. Sound engineering capabilities, as reflected in Happy Forging’s rapid diversification and delivery of complex forged/ machined components to auto/industrial segments, has fetched significant market share gains.

2. Focus on complex/critical parts and recent product additions will open up new opportunities: capability step-up from addition of 14 k ton press line (in Q3 FY23) helped expand product offerings from up to 90 kgs to complex parts up to 250 kg. Ongoing Brownfield expansion for 3.1 k ton (dedicated to PV), 6.3 k ton and 10 k ton press lines will help rebalance production and augment further capacity.

3. New order wins in PV and industrials will help de-risk dependance on commercial vehicle/tractors (~73% of revenues). Further, Happy Forgings intends to work on light weight forgings to support growth.

4. Structural demand drivers like opening of India-centric global supply chain and low revenue share of industrials and exports (versus peers) should help outperformance.

Street has built in standalone revenue/Ebitda/adjusted profit after tax compound annual growth rate of 21%/24%/30.7%.

Although execution and continued revenue diversification are critical success factors, we believe valuations at 24.2 times/18.9 times FY25/26 bloom standalone EPS partially price in the positives. Not rated.

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