Broker’s Call: MM Forgings (Buy)

Why It Matters

The upbeat revenue outlook and attractive valuation suggest upside potential for investors as MM Forgings capitalises on domestic replacement demand and export recovery.

Key Takeaways

• EBITDA marginally down, but revenue beats estimates.
• Domestic M&HCV volume expected 7% CAGR FY26‑28.
• Export revenue rises, supporting overall growth.
• Gross margin compressed 440 bps to 52.9%.
• Buy rating retained with ₹600 target price.

Pulse Analysis

MM Forgings, a key player in the automotive components sector, reported mixed Q3FY26 results that underscore a transition phase. While EBITDA slipped marginally, revenue surged to ₹405 crore, driven by a 14% rise in domestic sales and a 7% increase in export earnings. The company’s gross margin contraction to 52.9% reflects an adverse product mix, yet the top‑line beat signals resilient demand amid broader industry challenges.

Looking ahead, the broker’s research highlights several growth catalysts. Domestic M&HCV (medium and heavy commercial vehicle) volumes are projected to expand at a 7% compound annual growth rate through FY28, buoyed by improved economic activity and GST‑driven replacement cycles. On the export front, a low‑base rebound is expected in FY27‑28 as early procurement accelerates ahead of stricter emission norms. These factors, combined with a higher‑than‑industry revenue mix from new orders and advanced forging products, underpin an anticipated 13% revenue and 18% EBITDA CAGR over the FY26‑28 horizon.

From an investment perspective, the analyst retains a BUY stance, lifting the target price to ₹600 and applying a 16× FY28E earnings multiple. The revised EPS forecasts reflect higher depreciation and financing costs in FY26, but anticipate a 12‑16% uplift in FY27‑28 as margins improve and interest expenses fall. For investors, the stock offers a compelling blend of growth momentum, export diversification, and a valuation that remains attractive relative to peers in the auto component space.