Happy Forgings Limited: Engineering Growth with Record Margins in Q2 & H1 FY26

Happy Forgings Limited, a prominent Indian manufacturer of high-precision, safety-critical, heavy-forged, and machined components, has reported a robust financial performance for the quarter and half year ended September 30, 2025. The company, listed on NSE as HAPPYFORGE and BSE as 544057, showcased its highest-ever quarterly gross margin of approximately 60% and an impressive EBITDA margin of around 31%. This strong performance highlights the company's ability to navigate softening steel prices and uneven growth across various industry segments and geographies, while maintaining industry-leading profitability and strong cash generation.

For Q2 FY26, Happy Forgings recorded a revenue from operations of INR 377 crore, marking a 4.5% year-on-year growth. Gross profit increased by 7.1% year-on-year to INR 228 crore, and EBITDA rose by 9.9% year-on-year to INR 116 crore. Profit After Tax (PAT) grew by 10.2% on an adjusted basis to INR 73 crore. The company's product mix continues to be dominated by value-added machining, contributing around 88% of its revenue. For the first half of FY26, revenue stood at INR 731 crore, with PAT at INR 139 crore, reflecting consistent performance. The company's realizations were held stable at INR 251 per kg despite falling raw material costs, underscoring the strength of its precision engineering and premium product mix.

Strategic Expansion and Diversification

Happy Forgings' growth trajectory is fueled by strategic investments and diversification. The company's ₹650 crore capex program for heavy forgings is on schedule, aiming to create one of Asia's largest and globally second-largest facilities. This expansion will enable the company to enter higher-weight segments (components weighing 250–3,000 kilograms), catering to heavy forged component requirements in the Industrials and Farm Equipment sectors. Production from these facilities is expected to commence by the end of FY27.

Furthermore, a dedicated ₹80 crore capex is planned for FY26 to scale the Passenger Vehicle segment. This segment is projected to contribute 8% to 10% of total revenues within two years, driven by robust domestic and export demand. New projects in the Passenger Vehicle sector are set to begin from Q4 FY26 and Q1 FY27. The company has also secured new orders worth approximately INR 80 crore in H1 FY26, contributing to better realizations and supporting its diversification into high-value industrial applications, including wind energy, heavy engines for mining, defense, and data centers.

Navigating Market Dynamics and Future Outlook

While the domestic market has been a strong growth engine, the export market faced challenges due to global market weaknesses, customer de-stocking, and evolving tariff uncertainties, particularly in the Commercial Vehicle, Off-Highway, and Farm Equipment sectors. The U.S. market, which accounts for about 10% of the company's revenue (direct and indirect), experienced a 35-40% year-on-year decline due to 50% tariffs, leading to some projects being put on hold. Despite these headwinds, the company's diversified segment portfolio and focus on domestic growth opportunities have helped it navigate global volatility.

Management remains optimistic about the future, expecting revenues to grow in the coming quarters, with Q4 FY26 anticipated to show a better run rate as new projects come online. The company's balance sheet remains strong, with nearly 100% operating cash flow conversion in H1 FY26 and liquidity of approximately ₹315 crore, providing ample financial flexibility. With a Net Debt/EBITDA of (0.0) in H1 FY26, Happy Forgings demonstrates minimal reliance on external funding, supporting its organic growth strategy.

Conclusion: Sustained Growth and Strategic Resilience

Happy Forgings Limited's Q2 and H1 FY26 performance underscores its strong business fundamentals, effective growth strategy, and the dedication of its teams in a dynamic environment. The company's focus on expanding capacity, advancing forging and precision machining technologies, and deepening partnerships with leading domestic and global OEMs positions it for sustainable, broad-based growth. Amid global trade realignments, Happy Forgings continues to strengthen profitability and financial resilience, ensuring long-term value creation for its stakeholders.