MM Forgings Q1 FY27: Operating Growth Holds, One-Time Land Sale Lifts PAT

MM Forgings opened FY27 with a quarter that combined steady operating improvement with a large exceptional gain. On a standalone basis, revenue in Q1 FY27 rose to INR 427.01 crore from INR 369.18 crore in Q1 FY26, a year-on-year increase of 16%. EBITDA also grew 16% to INR 82.33 crore, while PBT increased 30% to INR 36.30 crore.

Net profit, however, needs context. Standalone PAT for the quarter was INR 91.66 crore versus INR 19.38 crore in the year-ago quarter. The company clarified that the quarter includes INR 56.25 crore (net of tax) profit on sale of land near Oragadam, classified under exceptional items. The operating story, therefore, is better read through revenue growth, EBITDA trend, and the ongoing shift toward higher machining content.

The quarter’s core narrative: more machining, better realizations

A key operational trend in Q1 FY27 was the continued rise in the share of machined output in the revenue mix. The company disclosed that the product mix as a percentage of sales moved to 33% forged and 67% forged and machined, compared with 38% forged and 62% forged and machined in Q1 FY26.

Management linked this to investments made in machining over the last three years, and guided that the machining mix should remain in the 65% to 68% range for the rest of FY27. This matters because it influences both customer stickiness and value addition per component.

The company also reported an improvement in sales per ton, which increased to INR 2.02 lakhs in Q1 FY27 from INR 1.93 lakhs in Q1 FY26. Management attributed the improvement in gross margin to higher realizations during the quarter.

Note: Q1 FY27 PAT includes INR 56.25 crore net-of-tax profit on sale of land near Oragadam classified as exceptional item.

Demand and geography: domestic steady, US gaining share

The company’s domestic and export mix stayed broadly stable, with a modest tilt toward the domestic market. For Q1 FY27, domestic revenue was 63% and export revenue was 37%, compared to 61% domestic and 39% exports in Q1 FY26.

Within exports, the US gained share during the quarter. The regional split for Q1 FY27 was India 63%, US 18%, Europe 14%, South America 4%, and others 1%. In Q1 FY26, India was 61%, US 16%, Europe 17%, South America 4%, and others 2%.

Management’s commentary on the call made the US driver more explicit. It indicated that tailwinds were coming from the commercial vehicle market in the US, particularly the Class 8 truck segment. At the same time, management characterized the growth outlook as broad-based, stating that future growth should come from a combination of India, Europe and the US.

In product end-markets, the investor presentation showed commercial vehicles at 71% of overall sales in Q1 FY27, with passenger vehicles at 14%, agri and off-highway at 14%, and others at 1%. Management also discussed an increasing focus on passenger vehicles and off-highway segments as part of the next phase of transformation.

Capacity, capex and the FY27 operating plan

A recurring theme in the call was the push toward higher volumes and better utilization. Management shared that the company sold about 78,000 tons last year and did about 20,000 tons in Q1 FY27. It expects Q2 and beyond to be materially better, targeting 23,000 to 25,000 tons per quarter from Q2 onward, and guiding that FY27 should cross 90,000 tons with a possibility of exceeding 1 lakh tons if conditions remain supportive.

The capex plan is designed around capabilities rather than only capacity. Management guided FY27 capex at approximately INR 150 crore. It also stated that around INR 30 crore to INR 50 crore could be replacement or debottlenecking capex. On the forging side, the company commissioned a 4,000-ton press recently, and management said a 16,500-ton press is expected to go into production by Q4 of the fiscal year.

Alongside machines and presses, MM Forgings is also stepping up automation. Management estimated that automation investments so far are around INR 7.5 crore to INR 10 crore, largely in the last two to three quarters. It expects this to rise meaningfully during FY27, indicating a range of at least INR 30 crore and potentially INR 40 crore to INR 50 crore by the end of the fiscal year.

The company also quantified its longer-term machining investments, stating that total investment on the machining side is about INR 1,100 crore. Management further said that of this, around INR 625 crore has been invested in the last five years.

Costs, working capital, and what to watch next

The call also highlighted two operational friction points: freight-linked costs and working capital intensity.

Management attributed a major part of the increase in other expenses to export freight costs. It stated freight rose sharply during Q1 due to the West Asian conflict and rerouting around the Strait of Hormuz. Management also cited a fuel cost spike in Q1 linked to the same conflict. These are not structural issues by themselves, but they show how quickly costs can swing in an export-heavy quarter.

On operations, management acknowledged labor availability constraints in April and May, which affected throughput. It said conditions improved in June as hiring stabilized, and from July onward capability utilization improved.

Working capital was addressed directly in the Q&A. Management accepted the concern and said the company is using AI tools to identify where inventory is stuck. It also said a rapid action force has been formed to push out inventory and reduce money stuck in goods, with an expectation of results over the next few weeks.

On the balance sheet, management indicated gross debt was around INR 750 crore and is expected to remain around similar levels in FY27. It said the company expects to repay around INR 170 crore during the year, but this would broadly be matched by fresh borrowing for investments, keeping gross debt stable. It added that proceeds from the land sale would be used to reduce working capital and capex-related borrowings.

Finally, management spoke about margin ambition. It stated there is scope for EBITDA improvement and reiterated a target of reaching 20-plus, aiming to extract 2% to 3% efficiency improvement from the system.

Takeaways

MM Forgings’ Q1 FY27 performance shows a clear improvement in the underlying business, supported by higher machining content, improved realizations, and a stronger quarter-on-quarter operational posture after early-quarter labor constraints. The exceptional profit from the Oragadam land sale materially inflated PAT, so the quarter is best evaluated on revenue and EBITDA trends.

The next few quarters will test execution. Management has guided a meaningful increase in quarterly tonnage from Q2 onward and has an active capex and automation pipeline, including the planned commissioning of the 16,500-ton press by Q4 FY27. Investors will watch whether this volume ramp, working capital reduction actions, and the stated target of moving EBITDA toward 20-plus can progress in parallel.