Ramkrishna Forgings - Diversifying Revenue Base: Yes Securities

Yes Securities Report

In its investor day, Ramkrishna Forgings Ltd., reemphasized its focus to diversify revenue base from commercial vehicle to other segments of auto (two-wheeler, passenger vehicle, off-highway tyre) and non-auto (oil and gas, railways and mining).

Ramkrishna Forgings targets revenues of Rs 45-48b by FY26E (versus ~Rs 26 billion in 9M FY24). This will be led by standalone business (~62% incremental contribution) and balance by recently acquired entities such as,

1. MACL-JMT revenues to be at Rs 6-6.75 billion in FY26E (versus Rs 1.75-2.25 billion annualized in FY24E) and from ACIL Ltd. at Rs 2.2-2.75 billion in FY26E (versus Rs 50 million annualized in FY24E). Some of the focus areas will be - 1. supply of differential assemblies and expect ~10% of overall volumes to come from the segment ahead,

2. railways both fabricated parts (already supplying to LHB) and forged wheel project which is an import substitute with take or pay arrangement with the railways for ~80,000 wheels per annum and ~20,000 wheels by the joint venture partner,

3. target to penetrate oil and gas segment through JMT Auto acquisition (~3.5% revenue contribution) and

4. ACIL (crankshaft) - RamKrishna Forgings to add six cylinder crankshaft capabilities to service heavy commercial vehicle customers beyond existing ACIL customers from two-wheeler, passenger vehicle, tractor and light commercial vehicle segment.

Street builds in revenue/Ebitda/adjusted profit after tax compound annual growth rate of 14.2%/15.4%/28.4% on a standalone basis.

Although execution remains key things to watch for, valuations at 29.3 times/24.3 times FY25/26 bloom standalone earnings per share is pricing in the positives, we believe.

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