MM Forgings - Attractive Valuation; Retaining A Buy: Anand Rathi

Anand Rathi Report

MM Forgings Ltd.’ Q4 Ebitda grew a healthy 18% YoY to Rs 753 million but lagged our estimated Rs 816 million due to less-than-expected revenue. We reckon the domestic medium and heavy commercial vehicles volume uptrend would hold, at a 5% compound annual growth rate over FY24- 26, on economic activity and replacement demand.

Growth would be driven by new products (gear blanks, long shafts, larger crankshafts) and market share gains. The company is trading at an attractive valuation of 18 times/14 times FY25E/FY26E earnings per share, at a large discount to peers like Bharat Forge Ltd. (56 times /40 times) and Ram Krishna Forgings Ltd. (29 times/24 times). With a higher wallet-share and sharper focus on EV specific components, its outperformance would continue.

The stock is among our top picks in ancillaries. We retain a Buy, with a higher 12-mth target price of Rs 1,500, 18 times FY26e EPS (earlier Rs 1,200, 15 times FY26e EPS).

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