RKFORGE — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Mr. Joseph George – IIFL Capital Services Limited

External Participants

Balasubramanian – Arihant Capital • Tanmoy Roy – Individual Investor • Sunny Gosar – MK Ventures • Aditya Kumar – Old Bridge Mutual Fund • Akash – NV Alpha • Devang Shah – Allvest Investment Managers Private Limited • Saket Saurabh – Sagari Capital • Lakshminarayanan – Tunga Investments • Tushar Raghatate – Omega Portfolio Advisers • Armaan – Blue Sky Fintech

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to Ramkrishna Forgings Q3

Thank you.

The next question is from the line of Tanmoy Roy, an Individual Investor.

Please go ahead.

Tanmoy Roy

Yes.

So yes, first of all, congratulations that they are improving on a quarter-on-quarter basis.

Just want to know one thing that as we know that our domestic sales is now going up and export sales is more or less a little bit going down only.

But the realization-wise, do you think that domestic sales realization can cover up the export sales drop?

Naresh Jalan

No, I don't think domestic sales can cover up in terms of the entire realization in terms of export sales.

But I think in the overall traffic, when you see in terms of the order wins which we have had, you will be able to see in coming days, our exports also considerably improving.

So, we are looking at upward in terms of realization in overall between domestic and exports together.

So, in isolation, domestic also will improve in terms of

Moderator · Conference Operator

The next question is from the line of Sunny Gosar from MK Ventures.

Sunny Gosar

My first question is regards to the North America business.

So, FY '25, we were north of about Rs.

1,000 crores of revenue.

And for the first 9 months, we've clocked about Rs.

480 crores, which basically on a 9-month comparative basis is down more than 40%.

So basically, if you can give us some understanding of how the business environment in North America is shaping up?

How is the Class 8 build rates currently as compared to last year?

And what is the overall outlook in terms of the North America business with all the new orders that we have won?

Naresh Jalan

I think, Sunny for the build rate right now, we have seen December, the new order which has come in North America Class 8.

I think we need to see how January performs.

But from whatever offtakes we are seeing from customers, we are seeing improvement, we are not very optimistic, but we are very cautious right now.

But what we can confidently say the worst is behind in terms of the North America sales.

From here, you will see what we have budgeted for is almost 10% Y-o-Y increase, in terms of the build rate and consumption in terms of our exports to North America from our existing clients.

And the new clients and the new order wins, which we have added is going to compensate us most of the losses which we have made in this year in terms of the utilization or in terms of the total sales in North America.

So, I think we are confident that in FY '27, we will meet most of the losses in terms of top line, which we have had in North America, which you are seeing in last 9 months.

From this quarter onwards to next in FY '27, we'll see almost we are back to normal in terms of the overall business we are doing in North America.

It may be not from existing customers, it will be with addition of new customers, which we have already had.

Sunny Gosar

Got it.

And in terms of the overall revenue mix, so say, last year we were at about 60% domestic about 40% export.

In this quarter our mix is about 70% domestic 30% export.

Now based on like the new order wins and the overall robustness in the domestic business environment, how do we see this mix changing, say over FY '27?

Because this will also be kind of a key determinant to the profitability considering exports has relatively better profitability as compared to domestic?

Naresh Jalan

So, Sunny, I think with the addition of new capacities of castings and forgings both, we are not looking at going back to 40%, I think, immediately.

But to be very, very pessimistic and to be very cautious on it, we are looking at coming year in FY '27 to almost 35% to come from exports and 65% to come from domestic.

Moderator · Conference Operator

The next question is from the line of Mr. Aditya from Old Bridge Mutual Funds.

Aditya Kumar

So Sir, I just wanted one clarification, so in the PPT, we have given a slide where we are showing new orders split over the next 4 years.

So, are these revenue line items over and above the top line we have achieved in FY '25 or FY '26?

Or does that also include renewal of some of the orders that will get their life will get completed in 1 or 2 years?

Naresh Jalan

No. Basically, Aditya, we have tried to give you a consolidated picture on past order wins and how in next couple of years, these order wins are going to get reflected in terms of revenue.

And when we say our capacity utilization and the kind of capacity capex, we have done to set up this capacity.

So, this order win basically gives a visibility or the revenue which we are showing in terms of getting into our books in the next couple of years, basically in terms of how the utilization from the new order wins is going to come through.

Aditya Kumar

Yes.

So, I wanted to get a sense, like this is the new orders getting converted to top line.

This is basically a new top line getting in.

So, like in TTM, we have done close to Rs.

3,500 crores of revenue in the stand-alone business.

So, this, let's say, in FY '28, if we are looking Rs.

2,700 crores of extra top line, this is in top of that Rs.

3,500 crores top line that we are doing today, right?

Should I read it in that way?

Or should I read it that it will be below something?

Naresh Jalan

No, no. It is only basically for new order wins.

The current business, current top line, which we have already achieved, this is not inclined with that.

Aditya Kumar

Okay.

And one more clarification on this.

In these new orders, does that also include the castings orders for which the new capacity is coming up and aluminium forging on the top line?

Moderator · Conference Operator

The next question is from the line of Mr. Akash from NV Alpha.

Akash

Sir, just one question from my side.

I think in the last 3, 4 quarters, we have seen quite a big hit in terms of our margins.

I just want to understand in terms of EBITDA margins, should we consider as this new normal?

Or by when do we expect to touch back this 19%, 20% kind of margins that we used to do?

Moderator · Conference Operator

The next question is from the line of Mr. Devang Shah from Allvest Investment Managers Private Limited.

Devang Shah

The way you have explained that we have a significant order book and even North America also, that the worst is over.

And also, there is some kind of railway is also going to add as far as future growth is concerned.

So, by considering all this fact and even you are saying there is an improvement as far as capacity utilization is concerned.

As far as top line is concerned, what kind of growth trajectory we can expect moving forward in FY '27 and FY '28 as a percentile?

Naresh Jalan

As a percentage to FY '26, which we are going to end, we can assume to 10% to 15% growth in terms of our top line.

Devang Shah

And for the FY '27 and '28?

Naresh Jalan

FY '27, 10% to 15%.

And I think in terms of CAGR, you can look at 10% to 15% growth year-on-year for next consecutive 3 years.

Devang Shah

Okay.

And my second question, as far as tariff related to Mexico is concerned, still there is an overhang is there or as far as our operations are concerned?

Naresh Jalan

No. In terms of RKFL, we have no overhang in terms of tariff from Mexico.

I think we are supplying on DAP basis.

So, we don't have any effect of tariff neither we are affected by those tariffs.

And in terms of our operations in Mexico, I think if this tariff prevails, it is going to be extremely good.

And we are more optimistic if this tariff prevails, my Mexico operations is going to ramp up sooner than what we expect.

Moderator · Conference Operator

The next question is from the line of Mr. Saket Saurabh from Sagari Capital.

Saket Saurabh

So, Naresh Sir, last time during the con-call, during November, you were quite bullish on the turnaround in the export business because the confusion regarding all this tariff and what tariff to be deployed, had created some bit of, I think, disruption, especially in October.

But if I look at the exports number, Sir, on Q-o-Q basis, it remained largely flat.

And even the North America numbers didn't quite, I think 20-odd percent up or in fact, slightly lower than that.

So, it doesn't really look like more of a turnaround.

So is it like, say, improvement that we were witnessing, say, in November, mid when the last con call took place, did not sustain?

So, December it again went down, it got disrupted and then say the Mexico thing impacted.

Naresh Jalan

Just to interrupt you, I have never said and I never give a quarterly update or quarterly statement, or market does not work on a quarterly basis.

I think on a sentimental way or in any optimism, it's on a yearly basis, what we look at the market as.

For mid-November, I cannot predict for 45 days what is going to happen in terms of exports or neither I can give any view on the same.

Saket Saurabh

Okay.

I was just talking about that maybe late December was considerably down vis-a-vis November.

That is what I'm trying to understand.

That did the sentiment really turn around?

Naresh Jalan

Like I had said to my earlier questions, we are optimistic in terms of our growth in North America, and we still stick to that.

And despite tariffs and other things, we still have new order wins from North America, and we are looking at maintaining what we have been doing in the past in terms of our North America sales.

In spite of the build rate being down, we'll be able to maintain those sales.

That itself is an optimism from our side vis-a-vis the market consideration right now.

Saket Saurabh

Fair point.

That's encouraging.

And sir, last time, you had told that by Q4, there is a remote possibility that we might come back to that 20% thing.

But this time, you don't seem that confident.

Is that a fair assumption that maybe that's why we are not committing anything vis-a-vis returning to that 20% thing during Q4?

Because last time, we were aggressive on that front, but we might even come back if things go in our favour.

So, have things been delayed?

Naresh Jalan

No, I have still answered that question in the past also.

We want to get to 20% level as soon as possible.

I don't want to put a date to that.

As a company, we are very aggressively working internally in terms of our cost

Moderator · Conference Operator

The next question is from the line of Mr. Devang Shah from Allvest Investment Managers Private Limited.

Please go ahead.

Devang Shah

Yes.

Good evening, Sir.

I want to know the way we are seeing that there is an improvement in the domestic market volume.

But in general, there is a realization that has not been improved Y-o-Y basis.

So, what kind of realization we are anticipating moving forward?

Domestic and even export.

Can you throw some more light on that?

Lalit Khetan

So right now, realizations are stagnant, you can see that.

And as the commodity prices are also stable, so it will remain like it, only it is likely to

Moderator · Conference Operator

The next question is from the line of Mr. Lakshminarayanan from Tunga Investments.

Please go ahead.

Lakshminarayanan

I just want to understand a bit more about the domestic market.

In terms of what kind of products you actually make, can you just give a mix of products, like front axle beam or knuckles or crankshaft, what is the mix?

And has it changed 9 months of this year to the previous 9 months of last year?

Naresh Jalan

I think product-wise, it is very difficult for us to tell you anything right now.

And we would not like to discuss product-wise.

But overall, I think every product is important for us, and I think every product is driving the growth for us.

Lakshminarayanan

Any change in the mix?

Naresh Jalan

No, I think product line-wise mix change, I think it is extremely difficult for us to say.

I think we are only adding new products and adding new capacity.

I don't think we are displacing any products like front axle beam or anything.

Product mix in terms of part families within the part family, there may be changes in terms of weight range.

Sometimes we get a higher weight range products in the same product family or sometimes we get lower range weight range in terms of product family.

That's the change basically happens within the product mix.

Lakshminarayanan

And in terms of the visibility you have in the domestic market for a calendar year 2026, which segments you actually see stronger velocity, whether it is CV or PV or earth moving or tractors?

Naresh Jalan

I think in terms of the domestic market, we are seeing traction both in entire automotive segment and off-highway segment.

Both are showing great traction.

But for RKFL, I think the biggest chunk of traction is going to come from Indian Railways.

I think that's the next level of growth, which is going to come from Indian Railways in FY'27.

And while our continued journey on in our existing business is going to continue to grow, but the significant growth is going to come from Indian Railways.

Moderator · Conference Operator

The next question is from the line of Mr. Tushar Raghatate from Omega Portfolio Advisers.

Please go ahead.

Tushar Raghatate

Thank you for the opportunity.

I just wanted to know my question is on the Railway segment.

You mentioned in the past regarding the undercarriage opportunities.

I just wanted to know our prospect on the undercarriage.

And in order to increase the wallet share, are we seeing any acquisition in the spring sales or in the brake in order to increase the wallet share or any pantogram or railway crossing? your view on the railway visibility going forward.

Moderator · Conference Operator

The next question is from the line of Mr. Armaan from Blue Sky Fintech.

Please go ahead.

Armaan

I said, I just want to have a clarification.

Like in last call, we told that for the full year basis, we still maintain our commentary of double-digit growth for the full year, right?

But in 9 months, already, it's just around 1% only.

So, are we still holding to that guidance?

Naresh Jalan

Yes.

We're still holding to that guidance.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question.

I would now like to hand the conference over to the management for the closing comments.

Questions and answers

Ramkrishna Forgings Limited

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer session.

The first question is from the line of Mr. Balasubramanian from Arihant Capital.

Please go ahead.

Balasubramanian

Good afternoon, Sir.

Thank you so much for the opportunity.

Sir, we have received new orders of Rs.

680 crores and what is the mix between domestic and export?

And how does the order pipeline look for Q4 and beyond?

RAJESH · Research Analyst

Thank you.

We would like to thank all for taking out the time and joining our earnings call.

We hope we have answered all your queries and for your satisfaction.

We would like for any further information, get in touch with us or with CDR India.

On behalf of Ramkrishna Forgings Limited, we wish you all a great week ahead.

We look forward to interacting again next quarter.

Thank you again very much for talking with us.

Thank you.

Moderator · Conference Operator

On behalf of IIFL Capital Services Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

Disclaimer

This is a transcript and may contain transcription errors.

Certain statements made or discussed on this call may be forward looking in nature and must be viewed in conjunction with the risks and uncertainties that the company faces.

The company does not undertake to update these forward-looking statements publicly.

Please also note that this document has been edited without changing much of the content, to enhance the clarity of the discussion.

No unpublished price sensitive information was shared/discussed on the call.