Target: ₹2,438
CMP: ₹2,157
We met with Happy Forgings’ (HFL) management, with discussions centered around incremental growth avenues, capacity ramp-up across forgings and machining to cater to the order book, and the steady outlook for the core CV and tractor segments. The ₹950 crore order book is expected to drive majority of topline growth over FY27-29, with PVs and industrials accounting for about 70 per cent of the order book.
While PVs and Industrials combined currently contribute 24 per cent to revenue, management expects their contribution to rise to 45-50 per cent over the medium term. These orders are secured at higher realisations and better margins, which, combined with the captive solar project, is expected to drive structural margin expansion over FY26-29. We expect margins to expand to 33 per cent by FY29 from 31 per cent currently.
Driven by new order wins, higher realisations, an improving mix, operating leverage and benefits of the captive solar plant that will come on stream in FY28, we expect HFL to record revenue/EBITDA/PAT CAGR of 25/28/30 per cent over FY26-29.
We reiterate our Buy rating on the stock with a TP of ₹2,438 (based on 38x Sep’28E EPS).