M M Forgings Limited
Know the Company
MM Forgings Ltd (MMFL), headquartered in Chennai, Tamil Nadu, is a prominent Indian company specializing in the manufacturing of steel forgings for both automotive and industrial sectors. Originally established as The Madras Motors Ltd in 1946, the company renamed to MM Forgings Limited in 1993. Over the past seven decades, MMFL has become one of the largest forging companies in India. It offers closed die forgings parts for Automotive industries, such as axle beams, steering knuckles, crankshaft, axle spindles, gear blanks, connecting rods, sockets, front hubs, ball studs, cross, and differential spiders. Its products widely used for commercial vehicles, passenger cars, off–road vehicles and high-pressure valves.
OPEN AN ACCOUNT
Invest in stocks curated and picked by our research team.
MM Forgings has eleven state-of-the-art manufacturing facilities in India, where it produces high-quality forged components for automobiles and other industries. While the company serves a diverse range of industries, including agriculture, railways, and construction, automotive sector is the significant contributor to its revenue. MM Forgings has established a strong presence in both domestic and international markets, with exports to North America, Europe and Asia making a substantial part of its business.
MMFL is considered a Tier-1 supplier in the automotive sector, so the company directly supply components to OEMs (Original Equipment Manufacturers). The Company has a robust global presence, exporting a significant portion of its products to North America, Europe, and Asia. The company’s ability to cater to international markets is supported by its adherence to global quality standards and a strong supply chain network.
The company is certified with various international quality standards like ISO/TS 16949, ISO 14001, and OHSAS 18001, ensuring their commitment to quality and safety.
Plant Locations:
The company operates with 11 manufacturing plants spread across Tamil Nadu, Maharashtra, Uttarakhand and Uttar Pradesh. However, majority of its manufacturing facilities are located in Tamil Nadu. Its plants are: Singampunari plant in Tamil Nadu specializes in producing closed die forgings, primarily serving the automotive sector. The Pulivalam plant in Tamil Nadu is known for manufacturing a wide range of forgings, including those for heavy vehicles and industrial applications. This plant also houses advanced machining facilities and precision testing equipment. The Padappai plant in Tamil Nadu focuses on producing precision forgings for both domestic and international markets, with a strong emphasis on quality control and the use of state-of-the-art technology in forging and finishing processes. The Singampunari (II) plant, also in Tamil Nadu, serves as an extension of the Singampunari plant (1) and is a key site for large-scale forging operations, equipped with high-tonnage presses and advanced CNC machining centers. Uttarakhand Plant for Machining of Front Axle Beams and Crankshaft and another one in Lucknow, Uttarpradesh for Machining of Front Axle Beam and Knuckle. Another one plant in Chennai, TamilNadu Manufacturing of Traction Motors, Alternators, Small motors and Ranipet manufacturing facility in Tamilnadu used for Machining of Crankshafts.
Strengths
MMFL specializes in producing a wide range of forged products, with a strong commitment to quality and innovation to meet the stringent requirements of various industries. The Company has an established track record of over seven decades in the auto components business with significant presence in both export and domestic market, as well as proven engineering capabilities. The company has consistently developed new products to meet customer requirement, offering a wide range of components.
MMFL positions itself as a comprehensive provider of closed die forgings for both domestic and international markets. The company serves diverse OEM clientele across the automotive, agriculture, construction, and industrial sectors. The company’s products portfolio includes various critical components in the automobile, tractor, earth-moving, power, material handling, oil, railway and core engineering industries. The company’s domestic clientele includes Ashok Leyland, BEML, BHEL, Audco Valves and Tractor Engineers, etc.
The majority of the company’s exports are directed to the US and Europe, which together accounted for approximately 60% of its overall export business. In the last financial year, domestic sales amounted to Rs 950 crores, while export sales totaled Rs 560 crores. Consequently, out of the total sales, domestically constituted 65% of the company’s overall revenue, with around 15% of sales derived from the US and European markets. Sales from South America contributed approximately 5-6%, while remaining of the revenue generated from other international markets.
MMFL has unmatchable engineering capabilities and machining capacity with indigenously developed dies and tools in the forging process helping them to maintain better quality with cost efficiency. This stringent quality helps the company is well acknowledged by its Tier-I customers and OEMs, which helps to getting repeat orders.
In FY24, MMFL produced 85,000 tons of forgings and sold 77,000 tons. The current financial year, Company aims to produce 92,000-95,000 tons, a growth of 10-12%, for which it focusing on three parts in heavy press namely front axle beams, knuckles and crankshafts. MMFL plans expansion in capacities in the segments where demand from customers is more than what company can supply. Company spent a Capex of about Rs 225 crs done in FY24 compared to nearly Rs 160 crs in FY23.
The company is diversifying its EV segment to mitigate risks and capitalize on the increasing demand.
MM Forgings is entering into the EV space, with plans to invest Rs 500 crore over the next three years. The company, through its subsidiary Abhinava Rizel, has recently commenced commercial production of e-motors. These EV motors have a capacity of up to 100 kilowatts. Abhinava produces motors that combine permanent magnet synchronous motors (PMSM) and synchronous reluctance motors (SynRM), achieving a rare combination of high torque and high RPM. These hybrid EV motors serve as import substitutes, thereby reducing import dependence. MMFL acquired an 88% stake in a startup named Abhinava Rizel in June 2023, which specializes in producing powertrain components for two and three-wheelers as well as light commercial vehicles.
In addition to manufacturing Permanent Magnet Synchronous Motors, the company will soon expand its portfolio to include gearboxes and controllers. The company also plans to add another production line by January 2025, which will produce motors with capacities of up to 160 kilowatts, although the subsidiary has the capability to design motors up to 300 kilowatts. These motors are intended for passenger and cargo 3-wheelers, for which the company has already secured orders. It also has products ready for EV passenger cars. The company is targeting revenue of Rs 1,000-2,000 crore from the EV business alone within the next seven to ten years, focusing on diversifying, refocusing on green energy, and changing its product mix. Company expected that the EV powertrain segment to become significantly stronger over the next decade.
For the Q1Fy25, MMFL reported a muted consolidated sale of Rs 370 crore and Net profit of Rs 30 crore. Sales and net profit were Rs 366 crore and Rs 30 crore, respectively in the quarter ended a year ago. The Company issued bonus shares for first time in six years, in July, 2024. Prior to that, it was issued 1:1 bonus issue in 2014 and 2008, respectively.
Outlook
The growth of the automobile sector is directly linked to the country’s economic performance, as rising income levels and industrial activity drive demand for both commercial and passenger vehicles. A strong economy boosts consumer confidence and spending power, which in turn fuels expansion in the automobile industry.
India holds a strong position in the international heavy vehicle arena as the largest tractor manufacturer, second-largest bus manufacturer and third-largest heavy truck manufacturer, globally. Despite global challenges, India’s resilient economy continues to thrive, making it the fastest-growing large economy in the world.
Factors like strong replacement demand, better financing options and infrastructural development are fueling strong growth for the Indian auto mobile industry. Simultaneously, India’s electric vehicle (EV) sector is experiencing rapid expansion, driven by government support and rising environmental concerns. As per the industry reports, the EV market is expected to grow at a CAGR of 49% between 2023-2030. All these particulars are expected to give a bright future for the company as the commercial vehicle segment is accounting almost 80% of MMF’s revenue.
Risk Factors
Even though MMFL’s products are used in several industries, 90% of the company’s revenue comes from the automobile industry, especially from the commercial vehicle segment. This industry is susceptible to cyclical in nature, which is a cause for concern for the company.
The company plans a capital expenditure of nearly Rs 1,250 crore over the next three years to increase its forging capacity by 45% and machining capacity by 40%. A significant part of this expenditure is expected to be funded through debt, which could leverage its balance sheet. MMFL already leveraged its balance sheet little bit over as its debt fund increased from Rs 530 crore in FY2021 to Rs 930 crore in FY2024. High leverage is cause of concern, especially, if the auto industry fell into the grip of slow down.
Major part of MMFL’s revenue comes from the automobile industry, which has a cyclical nature. Therefore, the company’s performance may be vulnerable to the industry’s growth and is sensitive to various policy changes by the government from time to time.
Sector: Auto Components & Equipments
Market Price: Rs. 600.00 as on today
FV: Rs 10/-
Stock Name: MM Forgings Ltd
BSE Code: 522241, NSE Code: MMFL
Market Cap.: ₹2881 Crore
Book Value: Rs. 169
Segment: Forgings- steel, carbon alloy
Incorporation: 1946
Headquarters: Chennai, Tamil Nadu
