M.M. Forgings - Rs.171.00

Established in 1974, MM Forgings Ltd. (MMFL) is one of the leading manufacturers of carbon, alloy and stainless steel forgings for high pressure valves, drivelines, engine and transmission parts for automobiles and railroad applications. Its product range boasts of a wide variety of parts for gears, shafts, forklift rods, connecting rods etc. for use in automobiles, tractors, earthmoving equipments, power, material handling equipments and core engineering industries. MMFL is one of the largest exporters of steel forgings in South India and has received 14 consecutive annual awards from the Engineering Export Promotion Council for its export performance. In the domestic market, it is a major player in closed die-forging enjoying 15% market share and forges anything and everything in the range of 60 kgs to 300 kgs. Its major clients are Ashok Leyland, L&T, KSB Pumps, BEML, BHEL and Hyundai Motors.

Presently, MMFL, has 4 manufacturing plants spread across Tamil Nadu and one windmill farm at Nagerkoil. The company has continuously expanded by adding state-of-the-art forging facilities and machining capabilities to cater to the requirements of its international customers. It is ISO 9001: 2000 certified by NQAQSR, USA, and is working towards TS 16949 certification. Last fiscal, the company increased the installed capacity of forgings by 3500 MT to 30000 MT at an investment of Rs.22 cr. To meet the rising demand, it is further increasing it by 5000 MT at a capex of Rs.35 cr. to be completed by September/ October 2007. To cater to the demand of parts in machined condition, MMFL has forayed into machining of forgings and plans to venture into the field of non-ferrous forgings also.

Fundamentally, the company is quite strong with 47.43% return on net worth and 26.54% return on capital employed. Importantly, the company tries to maintain margins instead of running after volumes. For FY06, it reported a marginal single digit growth for both its top-line as well as bottom-line. Sales stood at Rs.165 cr. with net profit of Rs.12.10 cr. compared to Rs.158 cr. and Rs.11.80 cr. respectively in FY05. Maintaining the same growth record, it reported flattish numbers for the June’06 quarter with single digit growth. For FY07, it is estimated to report sales of Rs.180 cr. and PAT of Rs.13.50 cr. leading to an EPS of Rs.22 on its equity of Rs.6 cr. Although no super growth is expected, still it can grow at a CAGR of 15% for the next 3 years. Having a 52-week high/low as Rs.315/ Rs.118, the scrip is a good bet and can appreciate by 50% in 18¬24 months.