Happy Forgings Hits Record Highs in Revenue and Profit

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AuthorSimar Singh|Published at:
Happy Forgings Hits Record Highs in Revenue and Profit
Overview

Happy Forgings Limited has posted its strongest quarter yet, with Q3 FY26 revenue climbing 10.4% year-on-year to ₹391 crore and profit after tax surging 22.3% to ₹79 crore. The company is aggressively expanding its manufacturing capacity and aims to significantly boost export revenue from FY27, despite facing some global market headwinds and raw material price volatility.

Happy Forgings Posts Record Quarter Driven by Expansion and Strong Domestic Demand

Happy Forgings Limited has announced its financial results for the third quarter and nine months ended December 31, 2025 (Q3 FY26), revealing a period of robust growth and operational excellence. The company achieved all-time high revenue and profitability metrics, signaling a positive trajectory fueled by strategic capacity enhancements and a strong focus on value-added segments.

Financial Performance: A New Benchmark

In Q3 FY26, Happy Forgings reported a 10.4% year-on-year (YoY) increase in revenue from operations, reaching ₹391 crore. This growth was supported by a healthy volume increase of approximately 14% YoY. The company demonstrated impressive operational efficiency, with EBITDA growing by 18.7% YoY to ₹120 crore, translating into a strong EBITDA margin of 30.8%. Profit After Tax (PAT) saw a significant jump of 22.3% YoY to ₹79 crore, with a PAT margin of 20.2%. This marks a substantial improvement, especially on a sequential basis where EBITDA margins touched a new high.

For the first nine months of FY26, revenue stood at ₹1,122 crore, up 6.2% YoY, with EBITDA growing 10.8% YoY to ₹337 crore and PAT rising 11.8% YoY to ₹218 crore. The company has successfully maintained and slightly improved its gross margins, hovering around 59%, and kept its EBITDA margins consistently strong above 30%.

Strategic Expansion and Future Outlook

Management has outlined an ambitious growth strategy centered around capacity expansion and increasing the share of higher value-added products. Key initiatives include:

  • Capacity Boost: The company commissioned an additional 9,800 MT of machining capacity in Q3 FY26, bringing the total to 68,000 MT. Further expansions are planned, with forging capacity set to reach 150,000 tons and machining capacity 82,000 tons by the end of FY27. Plans for heavy component capacity are on track for FY28.
  • Export Focus: A significant driver for future growth is expected to come from exports. The company aims to increase its US export revenue contribution from the current 7-8% to 15-16%. Overall, incremental peak annual business of approximately ₹800 crore is anticipated from FY27 onwards, with about two-thirds of this export-oriented, largely linked to industrial and passenger vehicles.
  • Sustainability Investment: To mitigate power costs, Happy Forgings has secured a long-term lease for 80 acres for a captive solar power plant, expected to provide benefits from FY28 onwards and reduce annual power costs by ₹25-30 crore.

Financial Prudence and Risk Management

The company continues to focus on efficient working capital management, maintaining stable intensity. It reported a healthy INR315 crore in cash flow from operations for the nine months of FY26 and holds over INR400 crore in liquid assets, providing a strong treasury cushion.

Capex remains a priority, with INR300 crore deployed in the first nine months of FY26 and an expected total of INR400-500 crore for FY26. Capex for FY27 is projected to be around INR400-480 crore. Raw material pricing, particularly steel, is managed through pass-through mechanisms with a lag, while scrap prices directly impact EBITDA. Forex exposure is handled via pass-through and long-term hedging.

Navigating Market Challenges

While the domestic demand momentum is expected to continue, the company acknowledges potential risks. These include the softening of steel prices (which is manageable), a challenging macro environment, and weak global demand impacting direct exports. Uncertainties around U.S. tariffs (though largely customer-borne) and softness in global commercial vehicle (CV), farm equipment, and off-highway segments are also factors to watch. Industry growth expectations for Indian CVs are for stable to modest low single-digit growth.

Peer Comparison

Happy Forgings operates in a competitive segment alongside players like Bharat Forge and Ramkrishna Forgings. Bharat Forge, a larger, diversified player, also focuses on exports and defense. While both companies are expanding capacities, Happy Forgings' aggressive push into higher value-add segments and a specific target for export growth from FY27 positions it to capitalize on evolving market demands. The current performance suggests Happy Forgings is effectively capturing market share and improving operational efficiencies relative to broader industry trends which show stability to modest growth in key segments like CVs, and some softness in global farm equipment markets.

Long-Term Direction

The company's strategic investments in capacity, focus on exports, and efforts towards cost reduction through captive solar power point towards a clear long-term vision. The anticipated INR800 crore incremental business from FY27 onwards, with a significant export component, could be a game-changer, diversifying revenue streams and enhancing profitability. Investors will be keen to monitor the commissioning of new presses and the ramp-up of export orders over the next 1-2 years.

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