KALYANIFRG - Kalyani Forge Ltd. Share Price

The management's outlook for Kalyani Forge Limited (KFL) emphasizes sustainable growth through strategic execution, business expansion, and prudent capital allocation. Key points include:

1. Growth Strategy: Focus on doubling revenue in the coming years via strong execution (cost control, product profitability), business development (new customers, exports), and targeted CapEx (machining expansion, forging modernization). Priority is on scaling driveline, axle, and engine components, balancing ICE and EV-adjacent (XEV) segments.

2. Margins: Targeting EBITDA margins of 15% (up from 11.5% in Q3) through cost optimization, product mix improvements (higher-margin machined components), and yield enhancements. Raw material cost reductions via supplier consolidation and process efficiencies are underway.

3. Order Book & Customers: Secured new orders from leading passenger car OEMs, MNCs, and export markets (Europe, US). Current order book stands at ~Rs.384 crores (peak annual volumes). Exports (15% of revenue) are expected to rise to 50% long-term.

4. CapEx: Rs.71 crores invested in fixed assets, focusing on machining capacity expansion, forging modernization, and energy-efficient utilities. Rooftop solar projects (40% power needs met) and shop floor digitization are operational priorities.

5. Segments: Industrial segment (gensets, off-road) drove recent growth; agro and CV segments are future focus areas. Non-core/low-margin businesses (turbochargers) are being phased out.

6. Market Resilience: Confidence in automotive cyclical recovery, aided by India's infrastructure push and agro-sector budget allocations.

7. Shareholder Value: Committed to standalone growth (no M&A plans) and improving ROCE through asset optimization.

The management remains optimistic about long-term growth via disciplined execution, exports, and margin-accretive product mix.

Major Questions and Answers from Kalyani Forge Q3 FY25 Conference Call:

1. Question: How are gross margins expected to improve, and what efforts are in place to reduce raw material costs?
   Answer: Initiatives include consolidating suppliers, improving raw material quality/yield, and optimizing product mix. A 200"“300 bps gross margin improvement is anticipated over two years via procurement efficiency, metallurgy audits, and process enhancements.

2. Question: Who are competitors in the machine connecting rod segment, and how will margins evolve?
   Answer: Competitors include domestic and global forging firms. Margins benefit from high-value machining and new lines. Growth focuses on OEM partnerships and expanded capacity for higher profitability.

3. Question: Why did industrial segment sales surge while agro/turbocharger sales declined?
   Answer: Industrial growth stemmed from gen-set demand and reclassification. Agro/turbo declines resulted from phasing out non-core businesses. Future agro growth targets tractor OEMs and new programs.

4. Question: Why hasn't revenue grown over the past decade, and what's the growth outlook?
   Answer: Conservative capex during electrification uncertainty led to stagnation. Current strategy prioritizes doubling revenue via new orders, machining expansion, and ICE/XEV diversification.

5. Question: How will margins improve to 15% EBITDA?
   Answer: Cost optimization (manpower, energy), product mix shifts to higher-margin machined components, and scaling revenue without proportional cost increases.

6. Question: What's the roadmap for doubling revenue, and what capex is planned?
   Answer: Revenue growth via value-added machining, exports, and forging modernization. Capex includes machining expansion (Phase 2), utilities upgrades, and a phased 4,000-ton press project.

7. Question: What's the customer concentration risk?
   Answer: Top 10"“15 customers contribute ~70% of revenue; no single customer exceeds 25%. Focus remains on diversifying through new client acquisition.

8. Question: How does Kalyani Forge compete with larger players?
   Answer: Focus on core products (e.g., con-rods, driveline), disciplined product portfolio, and leveraging long-term OEM relationships. Phased unprofitable segments to prioritize scalable businesses.

9. Question: What's the order book status and 4,000-ton press update?
   Answer: Order book at Rs.380 crore (peak annual volumes). The 4,000-ton press is delayed due to urgent customer orders; completion expected Q1 FY26.

10. Question: How will power cost savings impact margins?
    Answer: Solar installations (40% consumption), energy audits, and equipment upgrades aim to reduce costs. Savings are significant but undisclosed, contributing to margin targets.

11. Question: How will budget infrastructure/agro focus affect demand?
    Answer: Infrastructure spending boosts CV demand; agro focus aligns with new OEM programs. Both segments expected to drive growth alongside industrial/export expansion.

12. Question: Who are listed peers, and how is Kalyani positioned?
    Answer: Declined to name peers due to policy but emphasized differentiation via machining expertise, diversified segments, and long-term customer partnerships.