M.M.

FORGINGS LTD

BUY

CMP

670.00

Target Price

740.00

Result Update (PARENT BASIS): Q4 FY15

MAY 20th 2015

ISIN: INE227C01017

Index Details

SYNOPSIS

Stock Data
Sector
BSE Code
Face Value
52wk. High / Low (Rs.)
Volume (2wk. Avg.)
Market Cap (Rs. in mn.)

Other Industrial Products

522241
10.00
751.25/140.00
2378
8086.90

MM Forgings manufactures steel forgings in raw,

semi-machined and fully machined stages in
various grades of Carbon, Alloy, Micro-Alloy and
Stainless Steels.
Net profit for the quarter ramps up by 42.18% to
Rs. 111.15 million from Rs. 78.17 million, when
compared with the prior year period.

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS

FY15A

Net Sales
EBITDA
Net Profit
EPS
P/E

5025.34
1131.67
505.48
41.88
16.00

FY16E
5678.63
1275.69
597.26
49.48
13.54

FY17E
6360.07
1370.47
649.72
53.83
12.45

Revenue for the quarter rose by 17.80% to Rs.

1265.89 million from Rs. 1074.65 million, when
compared with the prior year period.
Reported earnings per share of the company
stood at Rs. 9.21 a share during the quarter, as
against Rs. 6.48 over previous year period.

Shareholding Pattern (%)

During the quarter operating profit increased by

22.16% to Rs. 277.41 million from Rs. 227.08
million over the corresponding quarter of the
previous year.
During Q4 FY15, Profit before Tax increased by
52.25% to Rs. 172.31 million from Rs. 113.17
million over the corresponding quarter of the
previous year.

1 Year Comparative Graph

The company has declared an Interim dividend of

Rs. 3 per share.

M.M.FORGINGS LTD

Net Sales and PAT of the company are expected to

grow at a CAGR of 15% and 28% over 2014 to
2017E respectively.

BSE SENSEX

PEER GROUPS

CMP

MARKET CAP

EPS

P/E (X)

P/BV(X)

DIVIDEND

Company Name

(Rs.)

Rs. in mn.

(Rs.)

Ratio

Ratio

(%)

670.00
39.00
124.80
578.25

8086.90
3393.00
1443.10
15884.50

41.88
2.44
8.43
27.21

16.00
15.98
14.80
21.25

3.40
1.27
0.71
4.04

60.00
35.00
100.00
10.00

M.M.Forgings Ltd
Nelcast Ltd
Precision Wires India Ltd
Ramkrishna Forgings Ltd

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q4 FY15,
MM Forgings Ltd manufactures steel forgings in raw,

Months

Mar-15

Mar-14

% Change

Net Sales

1265.89

1074.65

17.80

PAT

111.15

78.17

42.18

EPS

9.21

6.48

42.18

277.41

227.08

22.16

semi-machined & fully machined stages in various

grades, reported its financial results for the quarter
ended 31 Mar, 2015.

EBITDA

The company net profit jumps to Rs. 111.15 million against Rs. 78.17 million in the corresponding quarter ending
of previous year, an increase of 42.18%. Revenue for the quarter rose by 17.80% to Rs. 1265.89 million from Rs.
1074.65 million, when compared with the prior year period. Reported earnings per share of the company stood
at Rs. 9.21 a share during the quarter, as against Rs. 6.48 over previous year period. Profit before interest,
depreciation and tax is Rs. 277.41 million as against Rs. 227.08 million in the corresponding period of the
previous year.

Break up of Expenditure

Rs in Million
Break up of
Expenditure
Q4 FY15

Q4 FY14

% CHNG

Cost of Material
Consumed

454.25

542.62

-16%

Employee Benefit
Expenses

143.18

97.69

47%

Depreciation

83.76

97.74

-14%

Power & Fuel

130.59

108.33

21%

Other Expenses

250.73

189.84

32%

COMPANY PROFILE
MM Forgings started as Madras Motors Ltd in year 1946 as dealers of Royal Enfield Motor Cycles, UK in India.
1960s and 70s witnessed a boom in the automotive industry in India and all over the world. The Company
forayed into the forging business with a forge shop in Singampunari (Plant 1), Tamilnadu in the year 1974 with a
capacity of 780 MT per Annum.
By the mid eighties, forging business expanded steadily and the company capacity reached 3000 MT per annum.
The company dealership business was closed in the year 1990. In year 1991, has launched a new state of the art
forging facility at Viralimalai, Tamil Nadu with a capacity of 3000 MT per annum. The company consolidated
business during the period of 1994-2002 has secured the confidence of major automobile manufacturers around
the world. The company took over Gears India Limited, Chennai, India in 1999 and established it as Plant 3. This
is a machining unit & caters to supply forgings in machined condition.
As the demand rose steadily over the years, the company started a roll shop at Padappai (Plant 4) near Chennai
in year 2002 to manufacture transmission shafts. In the same year the company commenced a wind farm near
Panakudi, Tamil Nadu for generating power through non conventional methods to hedge burgeoning power
costs.
Product range of the company includes:
MM Forgings manufactures steel forgings in raw, semi-machined and fully machined stages in various grades of
Carbon, Alloy, Micro-Alloy and Stainless Steels in the weight range of 0.20 Kg to 60 Kg. The company caters to the
forging requirements of almost all sections of industry.
Achievements/ recognition:

Certified to ISO 9001: 2000 by NQAQSR, USA

Certified to QS9000 , discontinued recently

Recipient of EEPC (Engineering Export Promotion Council) award for export excellence for 14
consecutive years.

FINANCIAL HIGHLIGHT (PARENT BASIS)

(A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2014-2017E

FY14A

FY15A

FY16E

FY17E

Share Capital

120.70

120.70

120.70

120.70

Reserves and Surplus

1837.19

2258.50

2732.79

3197.36

1957.89

2379.20

2853.49

3318.06

Long-term borrowings

347.78

829.48

929.02

1012.63

Deferred Tax Liabilities

114.42

122.88

129.02

134.18

6.43

6.43

6.75

7.02

468.63

958.79

1064.80

1153.84

Short-term borrowings

1025.18

917.81

844.39

793.72

Trade Payables

155.52

275.03

310.78

341.86

Other Current Liabilities

140.60

159.06

174.97

188.96

Short Term Provisions

28.06

42.09

52.19

60.54

3. Sub Total - Current Liabilities

1349.35

1393.99

1382.33

1385.09

Total Liabilities (1+2+3)

3775.87

4731.98

5300.61

5856.99

2063.31

2365.08

2743.49

3127.58

b) other non-current assets

44.04

37.82

41.60

44.93

c) Non-current investments

1.40

1.40

1.62

1.75

159.82

148.18

161.52

174.44

2268.56

2552.48

2948.24

3348.70

Inventories

762.79

786.59

818.30

845.54

Trade receivables

289.50

291.25

311.64

330.34

Cash and Bank Balances

13.74

890.32

979.35

1057.70

Short-terms loans & advances

440.84

210.42

241.98

273.44

0.45

0.92

1.10

1.27

2. Sub Total - Current Assets

1507.31

2179.50

2352.38

2508.29

Total Assets (1+2)

3775.87

4731.98

5300.61

5856.99

M.M. FORGINGS LTD

SOURCES OF FUNDS
Shareholder's Funds

1. Sub Total - Net worth

Non Current Liabilities

Other Long Term Liabilities

2. Sub Total - Non Current Liabilities
Current Liabilities

Non Current Assets

a) Fixed Assets

d) Long Term loans and advances

1. Sub Total - Non Current Assets
Current Assets

Other current assets

Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn)

FY14A

FY15A

FY16E

FY17E

Description

12m
4114.35

12m
5025.34

12m
5678.63

12m
6360.07

Other Income

15.48

23.99

26.39

28.50

Total Income

4129.83

5049.33

5705.02

6388.57

Expenditure

-3324.94

-3917.66

-4429.33

-5018.10

Operating Profit

804.89

1131.67

1275.69

1370.47

Interest

-76.59

-91.41

-103.29

-113.62

Gross profit

728.30

1040.26

1172.40

1256.85

Depreciation

-360.24

-353.76

-374.99

-389.99

Exceptional Items

16.11

0.14

0.00

0.00

Profit Before Tax

384.17

686.64

797.41

866.87

Tax

-90.97

-181.16

-200.15

-217.15

Net Profit

293.20

505.48

597.26

649.72

Equity capital

120.70

120.70

120.70

120.70

Reserves

1837.19

2258.50

2732.79

3197.36

Face value

10.00

10.00

10.00

10.00

EPS

24.29

41.88

49.48

53.83

Net Sales

Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th June, 2015E
Value(Rs.in.mn)

30-Sep-14

31-Dec-14

31-Mar-15

30-Jun-15E

Description

3m
1254.46

3m
1259.32

3m
1265.89

3m
1379.82

Other income

3.79

6.34

9.83

7.86

Total Income

1258.25

1265.66

1275.72

1387.68

Expenditure

-974.94

-974.89

-998.31

-1076.26

Operating profit

283.31

290.77

277.41

311.42

Interest

-21.87

-25.37

-21.41

-25.26

Gross profit

261.44

265.40

256.00

286.16

Depreciation

-90.00

-90.00

-83.76

-88.79

Exceptional Items

0.00

0.07

0.07

0.00

Profit Before Tax

171.44

175.47

172.31

197.38

Tax

-40.00

-45.00

-61.16

-51.91

Net Profit

131.44

130.47

111.15

145.47

Equity capital

120.70

120.70

120.70

120.70

Face value

10.00

10.00

10.00

10.00

EPS

10.89

10.81

9.21

12.05

Net sales

Ratio Analysis
Particulars

FY14A

FY15A

FY16E

FY17E

EPS (Rs.)

24.29

41.88

49.48

53.83

EBITDA Margin (%)

19.56

22.52

22.46

21.55

PBT Margin (%)

9.34

13.66

14.04

13.63

PAT Margin (%)

7.13

10.06

10.52

10.22

P/E Ratio (x)

27.58

16.00

13.54

12.45

ROE (%)

14.98

21.25

20.93

19.58

ROCE (%)

34.98

36.00

35.68

34.35

Debt Equity Ratio

0.70

0.73

0.62

0.54

EV/EBITDA (x)

11.74

7.90

6.96

6.45

Book Value (Rs.)

162.21

197.12

236.41

274.90

4.13

3.40

2.83

2.44

P/BV
Charts

OUTLOOK AND CONCLUSION

At the current market price of Rs.670.00, the stock P/E ratio is at 13.54 x FY16E and 12.45 x FY17E
respectively.

Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.49.48 and
Rs.53.83 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 28% over 2014 to 2017E
respectively.

On the basis of EV/EBITDA, the stock trades at 6.96 x for FY16E and 6.45 x for FY17E.

Price to Book Value of the stock is expected to be at 2.83 x and 2.44 x for FY16E and FY17E respectively.

We recommend BUY in this particular scrip with a target price of Rs.740.00 for Medium to Long term
investment.

INDUSTRY OVERVIEW
The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased
investments in infrastructure and industrial production. The engineering sector, being closely associated with
the manufacturing and infrastructure sectors of the economy, is of strategic importance to Indias economy.
Growth in the sector is driven by various sub-sectors such as infrastructure, power, steel, automotives, oil and
gas, consumer durables etc.
India on its quest to become a global superpower has made significant strides towards the development of its
engineering sector. The Indian government has appointed the Engineering Export Promotion Council (EEPC) to

be the apex body in charge of promotion of engineering goods, products and services from India. India exports
transport equipment, capital goods, other machinery/equipment and light engineering products such as castings,
forgings and fasteners to various countries of the world.
Coupled with favourable regulatory policies and growth in the manufacturing sector, many foreign players have
started to invest in the country. India recently became a permanent member of the Washington Accord (WA) on
June 13, 2014. The country now joins an exclusive group of 17 countries who are permanent signatories of the
WA, an elite international agreement on engineering studies and mobility of engineers.
Driven by strong demand for engineering goods, exports from India registered a double digit growth at 10.22 per
cent to touch US$ 26.4 billion in June 2014 from US$ 24.02 billion in the corresponding month last year. This
growth can be credited to the robust expansion in shipments of aircraft, spacecraft parts and automobiles. The
second best performing sector was non-ferrous metals and metal products.
Engineering exports from India are expected to cross US$ 70 billion in FY 15 registering a growth of 15 per cent
over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these
traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise.
Outlook
The engineering sector is a growing market. Current spending on engineering services is projected to increase to
US$ 1.1 trillion by 2020. With development in associated sectors such as automotive, industrial goods and
infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected
to touch US$ 120 billion by 2015.
Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further
expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues
from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a
reality.

Disclaimer:
This document is prepared by our research analysts and it does not constitute an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients investment decision based on this document.

Firstcall India Equity Research: Email info@firstobjectindia.com

C.V.S.L.Kameswari
U. Janaki Rao
B. Anil Kumar
M. Vinayak Rao
G. Amarender

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