Happy Forgings Ltd Q4 FY26 Earnings Call: Rs.950 Cr Order Book at 40% Higher Realisations, Record EBITDA Margin 31.5%

Happy Forgings Ltd held its Q4 FY26 earnings call on May 21, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Margins & Balanced Growth

• Q4 FY26 revenue of Rs.426 Cr— up 20.4% YoY, driving full-year FY26 revenue to Rs.1,546 Cr (+9.8% YoY). Volume growth of 20.6% in Q4 and 10.9% for the full year; realisations stable at Rs.245/kg. (Segments 2, 3)
• Q4 EBITDA margin of 31.5%— a best-ever quarterly level, with EBITDA of Rs.133 Cr (+30.4% YoY). FY26 EBITDA margin of 30.4% expanded 160 bps YoY to Rs.471 Cr. (Segments 2, 3)
• Q4 PAT margin of 19.7%— also a record; FY26 PAT of Rs.302 Cr (margin 19.5%, up 90 bps YoY adjusted). Operating cash flow for FY26 was ~Rs.445 Cr; liquid assets stood at ~Rs.430 Cr. (Segments 2, 3)
• Gross margin improved 114 bps YoY in FY26— to 59.1%, aided by stable realisations despite a ~6% decline in raw material prices. Q4 gross margin was 59.4%. (Segments 3, 8)
• Machining mix reached 89% in FY26— up from 87% in FY25 and 73% in FY21, reflecting ongoing value-addition shift. Machining capacity expanded to 68,000 MT. (Segments 2, 10)
• Segment mix in FY26— Commercial Vehicles 37%, Farm Equipment 32%, Industrials 14%, Off-Highway 11%, Passenger Vehicles 6%. (Segment 2)

Rs.950 Cr Backlog at Significantly Higher Realisations

• New order book of Rs.950 Cr— executable over 2.5 to 3 years, with average realisation of ~Rs.340-350/kg versus current Rs.245/kg. The prior order book was ~Rs.800 Cr on a longer timeline. (Segments 5, 8, 9)
• Rs.250 Cr from heavy-weight forgings (700 kg to 1.8 tons)— dedicated to the data center segment, part of the total order book as of Q4 FY25-26. Data center orders worth Rs.200 Cr will start execution from Q3 FY28. (Segments 5, 10)
• Rs.140 Cr in new business wins over the past four months— spanning industrial, data center, and passenger vehicle sectors, supporting the late-teens volume growth outlook for FY26-27. (Segment 4)
• Segment mix expected to shift materially by FY26-27— CV declining to ~27% (from ~37% in FY26), industrial rising to ~30-31%, and PV to ~10%, reflecting the ramp-up of heavy forgings and precision components. (Segment 4)
• Average product price shifting from Rs.60,000 to Rs.25 lakh— and component weight from 200 kg to 2 tons, as the company transforms its scale toward larger, technology-intensive parts. (Segment 4)
• Export order book generated ~Rs.150 Cr per annum in Q4 FY25-26— with European demand expected to improve by single digit in FY26-27. A large European industrial order is slated to start in FY28-29. (Segments 4, 6)

Stepped-Up Forging & Machining Infrastructure

• Forging capacity expanded from 125K to 147K tons in FY26— guided to reach 161K tons by FY27 and 187K tons by FY28, with 26K tons added between FY27 and FY28. (Segment 10)
• New 10,000-ton forging press line commissioned in Q4 FY26— a 4,000-ton press line for passenger cars is expected to start in H1 FY27. Wind pinion shaft capex begins from Q2 FY27. (Segments 2, 6)
• Machining capacity guided to 82K tons by FY27— up from 69K tons, and further to 87K tons by FY28, supporting the rising machining mix. (Segment 10)
• Capex deployed in FY26 was Rs.460 Cr— management guided FY27 capex in the range of Rs.450-500 Cr. Planned capex of Rs.800 Cr over FY27-28 and FY28-29, inclusive of solar-related spend. (Segments 3, 7)
• Solar plant of 35 AC MW approved— with total capex up to Rs.170 Cr on 80 acres under long-term lease. Partial power cost benefits expected from FY28; generation to start from Q4 FY26-27. (Segments 2, 9)
• Large capex for data center and heavy engine requirements— expected to be completed by end of FY27, with trials in early FY28 and business anticipated from Q2/Q3 FY28 at ~Rs.800-1,000/kg realisation for machined products. (Segment 6)

Price Hikes, Cost Pass-Through & Mix Tailwinds

• FY26 EBITDA margin of 30.4%— management expects FY27 EBITDA margins to be broadly in line with FY26 levels, with volume growth offsetting cost headwinds. (Segment 2)
• Negotiating a 3.5-4% selling price increase— effective 1 April 2026 (Q1 FY26-27), covering freight, carbide, and packaging cost hikes; confirmations received from some OEMs with 70-80% PO amendments expected in 10-15 days. (Segments 5, 6)
• Steel is a pass-through— domestic with a 1-month lag and export with a 1-quarter lag, so raw material inflation is not a risk. Scrap price improvement will provide partial offset to other cost increases. (Segments 5, 6)
• Fuel represents only 1% of total cost— a 30-40% fuel price hike translates to just 0.3-0.4% impact on sales. Power & fuel together constitute 7% of costs. (Segment 5)
• New order book realisations of Rs.340-350/kg— versus current Rs.245/kg, a ~Rs.95/kg gap that provides medium-term headroom for gross margin expansion as the mix shifts toward technology-intensive components. (Segments 7, 8)
• Cost inflation from power, fuel, carbide, packaging, freight— expected to impact ~2.5-3% of revenue; partially offset by scrap price improvement and the selling price increase. (Segment 6)

Market Share Gains in Farm, CV & PV

• Farm equipment segment grew 20%+ in FY26— outperforming ICR's reported industry growth of ~10%. Management expects market share to improve from 41% to 45% in FY26-27. Capacity investments in two crankshaft machining lines in FY26 will support utilisation. (Segment 14)
• CV segment guided at ~35-40% growth in FY26-27— driven by market share gains from 32% to 42% on the MHCV side. Domestic CV matched industry mid-teens growth in FY26; export CV declined single digit. (Segments 2, 14)
• Market share with a large PV customer improved from 32% to 47% in FY26— one additional line added, with further gains expected. PV segment share in the mix is projected to rise to ~10% by FY27. (Segment 7)
• Domestic industrials grew 59% in FY26 (HSL basis)— while export industrials degrew 11%. Industrial segment revenue share dipped from 12% in FY25 to 11% in FY26 but is expected to rise sharply to ~30-31% by FY27. (Segments 4, 9)
• Crankshaft contribution was ~50% in FY26— flat vs. FY25, but expected to improve to 58-60% by FY28-29, driven by new PV programs (started 2-2.5 years ago) and export opportunities from OEMs reducing in-house investments. (Segment 13)
• FADA's April 2026 data showed tractor sales up 23%, MHCV up 15%, HCV up 8%, and MCVs up 27%— with low inventory levels signalling continued production momentum entering FY26-27. (Segment 14)

Data Center Ramp-Up, Export Expansion & Risks

• High-teens volume growth guided for FY26-27— supported by new program ramp-ups, market share gains, and the Rs.140 Cr in recent business wins. EBITDA margins expected broadly in line with FY26's 30.4% level. (Segments 2, 4, 14)
• Exports to Europe expected to grow mid-single-digit in FY26-27— with North America PV ramp-up starting from Q2 FY26-27. An additional PV program win is slated for FY27-28. A dedicated marketing team is pursuing North American CV OEMs. (Segments 4, 11)
• Data center infrastructure to be in place by Q4 FY26-27— with 6-9 months of development and testing before revenue generation. Management acknowledged "the growth opportunity from FY28 to FY35 is enormous" and that OEMs are already investing in tool development. (Segment 12)
• Short-term risks— global uncertainties and input cost inflation from US-Iran tensions, with management expecting pass-through to OEMs. No specific volume or margin guidance was provided for FY28. (Segment 2, 10)
• Balance sheet remains strong— AA-rated stable credit rating; cumulative internal cash generation nearly equal to cumulative capex over FY21-26. Management reiterated confidence in the investment strategy without providing new quantitative targets. (Segments 2, 15)
• Discussions ongoing regarding Tata Motors' acquisition of a European company— but it is too early to determine whether Tata Motors will handle sourcing for the acquired entity. (Segment 7)