Ladies and gentlemen, good day, and welcome to Happy Forgings Limited Q1 FY25 earnings conference call, hosted by JM Financial Institutional Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Mehta. Thank you, and over to you, sir. Thanks, Dell. Good morning, everyone. On behalf of JM Financial Institutional Securities, I welcome you all to this Q1 FY 2025 earnings call of Happy Forgings Limited. From the management team, we have with us today Mr. Ashish Garg, Managing Director, and Mr. Pankaj Kumar Goel, Chief Financial Officer. So as we do always, we'll start the call with a brief opening remarks [inaudible]. So with that, over to you, Mr. Ashish. Thank you. Good morning, and a very warm welcome to all of you to Happy Forgings Limited Quarter One FY 2025 earnings call. With me, I have Mr. Pankaj Goel, our CFO of the company, and our investor relation advisors as team. The Quarter One results, we have uploaded our presentation on the exchanges, and I hope everybody had an opportunity to go through the same. Let me start with highlights for the first quarter of FY 2025. We concluded with revenues of INR 341 crores and then EBITDA of INR 98 crores and EBITDA of INR 64 crores. On a year-on-year basis, we achieved a very good volume growth, approximately 3% and a 4% increase in realization, leading to 7% growth in revenues on an adjusted basis. This increased realizations was achieved despite the decrease in raw material prices, which were almost 5% Q1. Our profitability levels remained stable and broadly in line with what we achieved for FY 2024, with an EBITDA margin of 28.6% and a PAT margin of 18.7%. The machining mix continues to remain strong at 87%, contributing significantly to our high profitability levels. We are also starting to see an increased contribution from the passenger vehicle segment, which accounted for nearly 3.5% of overall sales during the quarter. We are optimistic that the segment will contribute approximately 8%-10% of the revenues in the next couple of years. Our revenue diversification strategy has helped us navigate some challenges in the market conditions in the underlying industrial segments. Business conditions in some of our underlying industries remain challenging, impacting our overall growth in this quarter. The general elections led to temporary slowdown in infrastructure spending. Additionally, while production volumes in medium and heavy commercial vehicle segments increased marginally on year-on-year basis due to the rise in bus production, whereas goods carrier production declined marginally on Sorry to interrupt. The production fell Sorry to interrupt, sir. Your line is not clear. Yes. I'll disconnect and reconnect you back. Okay. Okay. Ladies and gentlemen, the management line has been reconnected. Over to you, sir. So I will just repeat my last paragraph. We are also starting to see an increased contribution from the passenger vehicle segment, which accounted for nearly 3.5% of overall sales during the quarter. We are optimistic that the segment will contribute approximately 8%-10% of our revenues in the next couple of years. Our revenue diversification strategy has helped us navigate some challenges in the market, in the underlying industry. Business conditions in some of our underlying industry remain challenging, impacting the overall growth in the quarter. The general elections led to temporary slowdown in the infrastructure spending. Additionally, while production volumes of medium and heavy commercial vehicles marginally fell by almost 6%, excluding the market leader, the tractor segment saw a modest 1% year-on-year increase in production volumes for April to June quarter. Furthermore, a slowdown in the farm equipment and wind generation segments in Europe impacted OEM production volumes and off-takes in Quarter One. Despite these challenges, we maintained to increase our domestic revenue from commercial vehicles and farm equipment sector by almost 8% year-on-year, maintaining our market share with key clients. As pointed out previously, because of the disruptions due to Red Sea crisis, there was delay in installation of new machining capacities, and we were topped up in terms of utilization levels of machining capacities, and hence were constrained to ramp up production volumes in this quarter as planned previously. However, we have now started rolling out additional machining capacities, adding 1,500 metric tons during the quarter, while the delay in installation had an impact. We are now progressing and on track to in addition to the machining capacities. In Quarter Two, FY 2025, we will add another 4,500 metric ton, followed by 5,000 metric ton in Quarter Three, FY 2025. This will bring the total capacity, total increase of 6,000 metric ton in H1 and another 5,000 metric ton in H2. We have the necessary product approvals from our customers, which were long-awaited, and expect to scale up production concurrently with the capacity expansion. This gives us confidence in achieving higher revenues in the remaining quarters of the year. Looking ahead, we are optimistic about an improvement in the underlying business segments and a better operating environment. With political stability, we anticipate a continuous push on infrastructure spending. A good monsoon and an increase in sown area of Kharif crop are expected to boost rural demand during the upcoming festive months. Any improvement in growth in underlying segments will have a disproportionately positive impact on our sales as well. We continue to remain focused on growing our revenues and profits by leveraging our strengths and capabilities and strategic initiatives. This growth will be driven by a higher utilization of our existing units, ongoing capacity expansion, and the acquisition of new global customers. Our price pass-through mechanism will help maintain stable margins, reinforcing our growth trajectory. Our commitment to innovate, and efficiency, and customer satisfaction ensures that we remain competitive in the market. In conclusion, our robust engineering and machining capabilities, coupled with the advanced technologies we employ in our manufacturing operations, positions us well to capitalize on the expanding market opportunities. Now, I would like to hand over the call to Mr. Pankaj Goel for an overview of the financial performance during the quarter. Thank you. Hi, good morning, everyone. Myself, Pankaj Goel, CFO of the company. We are pleased to report the financial performance for Q1 FY 2025. Kindly note that during the Q1 FY 2024 previous year, financials were favorably impacted by some higher license received on one order, which positively impacted revenue by approximately INR 10 crore, EBITDA by approximately INR 7 crore, and PAT by approximately INR 5 crore. Hence, to facilitate YOY comparison, we have provided numbers after adjusting for this impact. Revenue stood at INR 341 crore, a growth of 4% year-on-year basis on reported basis, and a growth of 7%, excluding the one-time impact mentioned previously. I would also like to mention here that current quarter numbers are also impacted by a 5% correction in raw material prices. EBITDA stood at INR 98 crore, degrowth of 3% YOY on reported basis, and a growth of 5% on adjusted basis. EBITDA margin stood at 28.6%. Profit after tax for the quarter stood at INR 64 crore, with PAT margin at 18.7%. On an adjusted basis, PAT would have grown by 9% on a YOY basis. Our total finished goods volume increased by 2.8% to 13,933 metric tons. Realization per kg also stood at INR 245, and this was despite a contraction in raw metal prices if compared on a YOY basis. We would like to reiterate that we are supported by a robust balance sheet, and we are well-positioned to seize growth opportunities and optimize our returns for further strategic deployment. That is all from our end. We now leave the floor open for questions and answers. Thank you very much. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Nishit Jalan from Axis Capital. Please go ahead. Yeah, thank you for the opportunity. I have two questions. Firstly, on the passenger vehicle side, just wanting to understand, when you have the confidence that, share of EV revenues will go up to 8%-10%, do you have, already orders in hand, or some of this you are anticipating, given that now you have started to scale up this segment? And the order inflows in this, business are, largely from the domestic OEMs, or you have or you will start to export in this segment going ahead as well? Yeah. So this is the first question. I'll come back to the second question after the answer. Yes. Hi, Mr. Nishit Jalan. So, with regards to PV as a sector, we started work almost one and a half, two years back, with one domestic large OEM. We also entered into some large agreements, in the last six months with North American clients, which account for today almost INR 150 crore of annual orders, which will start from Q4 of this financial year, and will take a full load, you know, by FY 2026, 2027. So this is accounting to almost INR 150 crore, and these are from North America, which is in addition to the existing business that we have already started. Plus, we are already in a phase of quoting many new RFQs to the same clients in North America. Okay. Thanks, Ashish. Ashish, these are largely for crankshaft supplies, or you are looking to supply other components to PV segment as well? These are, these are mixed components. We also have certain suspension and certain EV programs also signed up, where we'll be supplying steering knuckles in full machined condition for the EV applications. And also there are certain flanges which are required for the suspension. Okay. Just one question, generally, there's a perception that non-auto, sorry, off-highway CVs and all are slightly higher margins business, while passenger vehicles, the profitability is slightly on the lower side. Will this be true for you as well, or this will be at par with company margins? This will be at par with company margins, because all of these products are fully machined. So these are not, as forged products that we have taken. These are all fully machined. Okay. My second question is on, if I remember, in your order inflows, almost 50% of incremental share was from export orders. So how do you expect export to ramp up? Obviously, one quarter is not an indication, but this quarter we have seen some decline. Is it because of the Red Sea crisis or orders are yet to ramp up? And how do you see the end user industry in North America? Because of late, order inflow numbers on Class 8 trucks are not coming in good, and there is a noise around recession in U.S. In that context, how do you see the end market or CV industry overall, CV and off-highway industry overall in North America and Europe? So for the orders which we were planning to ramp up in this year, these are the orders majorly from, coming from Europe. Whereas we have worked on the new projects from North America as well, but those are not in Class 8 right now, and those are, you know, varied across the industrial passenger vehicle as well as farm. So, if you look at those orders, these are all orders are fresh. Yes, you know, the European market in terms of wind sector as well as farm equipment sector is down by 30%-35%, which was, you know, from the up of, from last year. But, you know, we are executing these orders, but not to the full tool, you know, the way it was expected. But they, over there as well, we are kind of developing more and more parts, because these are new clients for us, where we are getting a lot of opportunity to develop a lot of business with them. So this is how the market is looking like right now in farm. In farm, as well as in wind, in European side, but Class 8, we are not working in North America. Okay. So basically, within the exports, Europe is a much larger part for you compared to Americas, and this will continue to be the case in the next three years. Is that a correct understanding? No, in the next few years, we will see a significant export share coming from North America. So the major orders that we have on the industrial side and the PV side, the new orders which are in development phase, which will go into ramp-up from Q4, are from North America. Okay. Just one small question. On machining side, your current capacity is 52,500, which will probably increase to 62,000 by the end of this financial year, right? Yes, yes. We are adding close to 11,000 tons of capacity. We might plan to add some more capacity by Q4, but at the moment, this 11,000 tons of capacity is already lined up and already in phase, out of which 6,000 tons of capacity is being added in by H1 and balance 5,000 in H2. Okay. With that, that was my question, because your utilization level will still be high even after this addition. So typically, Ashish, what is the lead time, which is there when you decide to expand capacity and when it, when it actually happens? It takes around, you know, minimum for the machining lines, eight to 10 months. So we are proactively ordering some more machines for next year, and we'll be kind of planning it. Some long lead machinery we are planning to, you know, order for next year as well. The good part is we have kind of received the much-awaited approvals for some of the critical projects your company was working for the last two to three years. That was very important, and now we're in a phase to ramp up. critical projects, as in, some new critical components, which, Yeah, critical projects where the Company was kind of working for the past two to three years, so we have received the approvals for the same to ramp up on the new capacities. Okay, thank you. I'll come back in the queue. Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Amber Shukla from Motilal Oswal. Please go ahead. Yeah, hi. Thanks for the opportunity. So my, I have a couple of questions. First question is on, I mean, demand outlook. So firstly, the domestic CV side, which was weak in Q1, so what kind of recovery are we expecting there? And, secondly, what are your views on the exports market as well? Yes, thank you, Amber. So on the domestic side, as already discussed, that Q1, we have anticipated almost 5%-6% production drop, whereas the consumption drop in terms of components was even more, because the multi-axle vehicle production and the long-haulage production of trucks was less, which normally require more forging. So if I see from that angle, the demand for components was almost 10% down in Q1 on the MHCV side. Whereas on the farm side, you know, barring one or two customers, we have also seen downfall by almost 4%-5%. Looking into decent monsoon and low base, we expect farm equipment single-digit growth in the next three quarters. Even on the CV side, as CV players are mentioning about the single digit growth, and if it is flat in H1, then it should be a strong growth in H2. So our endeavor will be to outperform the market, and we are working on more and more products with our existing clients ourselves. With regards to exports, yes, farm and wind sector right now in European market is down by 30%-35%, which is a significant dip, but at the same time, we continue to explore and, you know, ramp up on our existing projects, which were onboarded in last year. On the North American side, as most of the programs are new for us, and these are replacement programs, so we anticipate good demand going forward on the North American projects as well. From new orders perspective, so the new orders win, which we have talked about in the past with respect to CVs and tractors, how much of them has started coming into production? It will be difficult to quantify, but the capacities that we are successfully adding, and there are certain customers on these capacities, like the PVs, if you can see, we have already, you know, ramped up in Q1. Further also, we are ramping up. Similarly, on the CV and farm, there were certain programs which company already adopted, where company was working, we'll be ramping up in this quarter. Understood. Understood. Just last question on the product mix. So, I mean, we have already reached a very healthy level, so machining mix is over 85%, and industrial top five put together will be over 20% now, exports is around 18%-20%. So how do we see the revenue mix from here? And I'm asking this from margin perspective. So this year, probably you will see it will be range bound 85%-90% in terms of the machining. And so roughly, you know, see, most of the projects, almost, the pipeline that we have, 90% of the order books are for full machined components. So more or less, it will be in line. The percentage will not vary too much. Okay. Okay. Thanks, I understand. That's all from my end. Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead. Hi, Ashish. Couple of questions from my side. One is, you talked about some of the critical components which we were working on, has got approval of customers. So, were these those genset crankshafts, which we're working on? And, by when do we expect supplies of that to start, commercial supplies of that to start? Yes. Hi, Jinesh. So some of the projects that we are working that already mentioned was on the PV side, which we have already executed, and we are kind of ramping up. The other ones are from the large engine manufacturer, where we have started you know ramping up. And at the same time there was on the farm side as well. So there was, in totality, you know, these approvals that we have received are from the domestic clients towards CV, farm, and industrial, where company were, you know, we were working on, and we are kind of ramping up for these clients now. On the genset side, we have already executed and already received the approvals, but the capacity and the ramp up will start from third quarter on that project. Got it. Got it. In that context, how should we see the contribution of industrial segment over the next two to three years, given that the opportunity there is opening up in a big way? So even besides, you know, we are working towards industrial, because last year, if you see, there was a big jump in the industrial. And there is kind of other programs which, you know, have started on the PV, CV, as well as on the farm side, which will kind of ramp up. So industrial, probably for next two quarters, will be in a range of 18%-20%. But we have a lot of more development, which is ongoing on the wind side, and which will kind of, you know, ramp up to almost 25%-26% levels in next year, is what we are targeting. But there is a lot of development which is ongoing with our existing client base on the wind side as well. Got it. Got it. Lastly, with respect to our CapEx, so while we obviously are adding capacities on the machining side, do you think we'll also need to, beyond what we have already ordered on the forging presses, do we need to look at adding capacities for fiscal 2027, 2028? So we are, we will be adding. So currently, if we see, we have capacity on our 14,000 ton press line, where we are ramping up for some of the projects like front axle beams and large crankshafts, which probably will happen in this year. Besides this, we are also adding 6,000-ton, 6,300-ton brand new press line, which will start from Q2 of this financial year, which is largely towards the farm equipment and passenger car requirements. So that is what we are adding in this year. And 10,000-ton press line will get added in next financial year, which is already ordered. Okay. Sorry, what I meant is beyond this 6,000 and 10,000 ton, given that the press lines also take a little longer to come, for- We are planning a 4,000-ton press line, which, you know, the ordering of that probably will finalize in this quarter, which will be towards the PV requirements of North America, largely to cater to that requirement. The lead time for that line is around eigth to 10 months, so it will largely come in next financial year. Okay, okay. In that context, how should we budget for CapEx for this year and next year? be in a range-bound of almost INR 200 crore on an average, for this year and next year, Jinesh. Got it. Got it. Great! Thanks, and all the best. Thank you. Thank you, Jinesh. Thank you. The next question is from the line of Deep Shah from Yes Securities Limited. Please go ahead. Hey. Hi, Ashish. Thank you for the opportunity. So basically, a question on EV. So obviously, we have seen the ramp-up in the overall contribution, and that is led by, you know, the wins in the OEM side, on the domestic side, and obviously the North American customer. Apart from that, have we booked any new customer, both from the domestic and export side? That's the first question. Yes. Hi, thank you. So on the EV side, yes, we have already developed. There was a large order win on the E-Axle program in the last two quarters that we have achieved from a North American client, where we are already working now and successfully developed the parts at our end, and now the parts are under testing, which will, the ramp-up for those will start from Q4 of this financial year. And it's a kind of a seven-year program. So that, yes, there are, it's like, it's, these are all full machined components, steering, particularly steering knuckles. So, just clarification. So as of today, we will be supplying to about what, three OEMs, for the EV, or is it two? Can you come again? Your voice is not clear. Yeah. Am I clear now? Yes, yes, please go on. Yeah. So what I'm asking is, can you share the number of EV OEMs that we supply to, today, in terms of, let's say, two or three? These are three EV OEMs today that, you know, we are working with. Okay. We are also working on some more programs with our existing, you know, clients. Sure. And, just a clarification, CapEx, again, you have indicated about INR 200-INR 250 crores over the next couple of years each. So out of which, EV would be how much, since you are adding the new machining line and all that? So that would be like, if you can bifur- It will be around. If you can bifurcate, it will be around 20%-25% will be towards EVs, I can say. That would, directionally should increase, going forward for next two to three years. Is that right? Yes, yes. With more clarity of the businesses, the way we are putting more businesses, yes, this will increase. Perfect. Perfect. Thanks a lot, yeah. Thank you. Thank you. Thank you. The next question is from the line of Sidhesh Pawar from Universal Sompo General Insurance. Please go ahead. Hello, sir. Am I audible? Yes. Yes. Yeah. So, my question was on the railway component side, and I see that you are not, I mean, the exposure towards railway is quite less, from a component side. Could you give us some guidance on the same, like any buildup of capacity? Yes, you are right. We are currently very small on the railway side. Currently, if you see, we work on very specialized tenders, which are INR 15-INR 18 crore per annum. We are import substitutes over there, where realization is almost INR 800-INR 850 a kg. These are very specialized machining piston pins, where we are import substitutes. But besides that, we are not in supplies of any other source parts on the railway side. But whereas, as a business case, you know, we are working toward. We have started working towards, you know, defense as well as aerospace. We will be working in next two years. We are forming a team, and probably we'll have more clarity in next, you know, two or three quarters. We started working on that side. But railway, as of now, yes, you know, we are not catering much. Okay. So are you envisaging any buildup of capacity in the coming next two years or so? Not towards the railways as of now. We are not having, you know, currently, clarity over it, because we are not basically in the commodity-based components, very specialized components, and in which where the machining contribution is very high. So railways, as of now, we have not identified products for our range. Okay, great. Thank you so much, sir. Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Sahil Rohit Sanghvi from Monarch Networth Capital. Please go ahead. Yeah, hi. Good morning, sir, and congratulations on sustaining a decent set of numbers even in difficult times. Now, my first question is, while we have also somewhere admitted in the annual report that we're targeting a 15%-20% growth and don't really want to hold you to that number, but the way we have progressed in the first quarter, are you still, you know, targeting a 50% kind of growth in FY 2025? Any kind of direction you can give on that. So hi, so our endeavor is to keep outperforming the underlying industry. So keeping aside, the, you know, the freight cost and the steel price, then the quarter one growth for us was around 12%, where the underlying industry was going through a tough phase, and also on lack of capacities in terms of machining, because most of our projects are full machined. There was kind of, you know, a delay of almost one quarter because of Red Sea. Whereas the capacity addition is in place, we have received the requisite, you know, approval, so we'll be ramping up on these capacities. So our endeavor will always be to outperform the market, and if we are seeing a kind of, you know, double-digit growth coming in CVs and, you know, in farm as well in H2, that will kind of add up to our growth levels. But as of now, you know, we are working towards our new projects and all the approvals, and the ramp-up is in place. Got it, got it. My second question is, how do you see this, heavyweight, forge products, building up in the next one to two years? I mean, the ones which are, you know, up to 250 kgs. I mean, we will have that, 10,000-ton press machine also coming up next year. So, any bit of, you know, more understanding you can provide us? I mean, what are you seeing, how, what, what kind of traction new products are you seeing on that, on the heavyweight forging side? So on the heavyweight product side, we are already, you know, already working on certain programs on front axle beams and also large crankshafts, which will kind of come on 14,000-ton line, as well as some of the industrial products related to wind sector, which will go on these lines. So we are already working on up to the range of 200 Kg-250 kg. But at the same time, we are exploring new demand from 250 kg plus requirement, which currently we cannot do, but there is a requirement from 250 kg to one ton sector as well. But on the heavy side, we are already working towards a lot of projects we have quoted in the last three to four months, and is kind of in discussions because of the issues which are ongoing in North American market, as there is a slowdown, as well as in the European market. There is a lot of opportunity that we are seeing on the agri side as well for large parts, because currently in the domestic side we are seeing 70 HP farm equipment tractors, but on the global side we see 350 HP-400 HP as well, which requires bigger forgings on these lines. Right. Right. Right. Got it. Got it, sir. Thank you and all the best, sir. Thank you. The next question is from the line of Vivek Kumar from JM Financial. Please go ahead. Hi, hello, Ashish, and Pankaj thanks for taking my question. So this is pertaining to the defense segment. If you could, please elaborate on the product types, capabilities required, lead times, and the opportunity. Yeah. Thanks. So we have just started working on the defense side, like almost, you know, two months back, where we have kind of formed our team and we're just working towards it. So probably we'll have more clarity on this, you know, going forward, you know, next two or three quarters, because we are kind of exploring what all tenders we can quote from our existing lines, and what all CapEx probably we will be requiring going forward if we try to enter into this sector. But largely, we can see that, you know, the, there is a huge requirement right now, which is coming out of 155 mm shells and, other artillery requirement, which is there. So we'll have probably more clarity over it going forward. We've just started. All right, Ashish. Thank you, and all the best. Yeah. Cheers. Thank you. The next question is from the line of Manan Vora from AlfAccurate Advisors. Please go ahead. Thank you for the opportunity, and congrats on the numbers. I had one question: even as we talked about the INR 200 crore CapEx for this year, for this FY and the next FY, are we going to look into debt or raising equity, diluting equity, or, like, internal accruals? Could you please give some color on that? Yes, hello. So for this CapEx, we don't need to rely on equities. Our cash accruals is good enough to actually take care of this. So normally, if you see a track record, 70%-75%, you know, we'll be able to, you know, whatever cash we are accruing, we'll be, you know, able to deploy in terms of CapEx. So the CapEx that we have planned, we will. There is no need to borrow, you know, any funds for this CapEx. For both the years? Yes, for both the years. Okay, thank you. That's it. That's good to know. Just one more thing. Yes, we are working on one solar project as well, which will require a CapEx of over INR 100 crore. If that is executed, if we receive the feasibility clearance from the Government of Punjab, that will require, we will go in for some funding of that project. That might be debt? That'll be debt of almost INR 70-INR 80 crores. Okay. Thank you so much. Thank you. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, we have reached the end of our question and answer session. I would now like to hand the conference over to Mr. Ashish Garg, Managing Director, for closing comments. Thank you. At Happy Forgings, our growth is an outcome of proactive and strategic investments in assets and their optimal utilization. This has helped us expand our customer base and consistently innovate our business model to maintain a leading position within the market. What distinguishes us in our focus strategy, aimed at enhancing the value proposition of our product offerings while consistently aligning with industry trends. With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our investor relations advisors. Thank you. Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us. You may now disconnect your line.