Ramkrishna Forgings Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Export engine fires, Red Sea clips the quarter: Exports hit a record INR 400 Crores in Q4, but the Red Sea crisis erased INR 20.75 Crores of revenue and inflated freight costs by INR 17 Crores, a headwind that persists into FY25.
• A landmark contract opens a new vertical: The USD 220 Million, 10-year light vehicle contract with North American Tier 1 customers is the quarter's signature win, promising a double-digit PV share within two years.
• Vande Bharat is a small order with a big tail: The INR 270 Crore order for 32 train sets is just the prototype batch; management expects it to convert into 100–150 train sets, potentially booking the railway vertical through 2029.
• Margins have a clear, multi-year upgrade path: A deliberate shift in the export/domestic mix toward 50:50, plus a move to 60:40 auto/non-auto, is expected to add at least 100–200 bps of margin over the next three years.
• What to watch next quarter: Whether the Red Sea freight surcharge is successfully passed to customers, the ramp-up of JMT and cold forging production, and any update on the stalled electric PV order.

The Export Surge & Red Sea Drag

• Record exports, clipped by geopolitics: Export sales reached INR 400 Crores, the highest ever, but would have been INR 20.75 Crores higher absent Red Sea shipping delays. The rerouting added INR 17 Crores of extra freight cost in the quarter, a burden management calls ongoing, not one-time.
• Mix shift is structural, not seasonal: The export/domestic ratio improved from 63:37 to 58:42, lifting gross margin to 54.3% and pulling export realization above domestic. Management targets a 50:50 mix within three years, which alone is expected to add 100–200 bps of margin.
• Freight cost pass-through in progress: Management is in active discussions with customers to recover part of the elevated freight and expects costs to rationalize by 10–15% once agreements are concluded.
• Export growth is order-book-backed: The surge reflects last year's order wins converting to sales, and management states this level is sustainable into the current financial year.

Naresh Jalan: "I think there are new order -- last year, the order wins whichever they have started showing results. And these are basically those orders which are getting converted to sales. And that is showing this kind of growth. And I think this -- like Lalit has said in his opening statement, this growth is sustainable going into the current financial year."

The USD 220 Mn Contract & Light Vehicle Entry

• A new vertical opens: The USD 220 Million, 10-year contract marks entry into the light vehicle segment, supplying Tier 1 customers in North America. Management expects the PV share to reach double digits on a consolidated level within two years, with profitability sustained at levels similar to current operations.
• Mexico plant is the delivery vehicle: The Board approved manufacturing and supply operations in Mexico to serve this contract. Equipment procurement will take another four to five months; revenue contribution this year is only INR 8–10 Crores, with substantial growth expected the following year.
• Cold forging capacity is fully booked: The new cold forging facility is already sold out by orders, with samples shipping from Q2 FY25. Full utilization of 25,000 tonnes is expected by FY26, with peak topline of INR 250 Crores.

Vande Bharat & the Railway Opportunity

• The order is a prototype wedge: The INR 270 Crore order for 32 Vande Bharat train sets, to be supplied to the BHEL-TRSL consortium, is small relative to the opportunity. First samples submit this year, serial production begins by December, and the contract covers deliveries through FY26.
• The real prize is 100–150 train sets: Management believes the actual requirement is 200 train sets and expects the initial 32-set order to convert to at least 100–150 train sets once prototypes are validated, which would book the railway vertical through 2029.
• Railway JV is holding capacity for better pricing: RKTR is deliberately not onboarding new customers yet, waiting for capacity to come online in 1.5 years. Management believes market demand is strong enough to command better realization than the railways contract, so it will add customers only once capacity is available.

Naresh Jalan: "This order is only for 32 train sets, but actual requirement is for 200 train sets. So after building the prototype and supplying the prototype and it gets validated, we feel that this 32 set opportunity is going to get converted to at least 100 to 150 train sets."

Subsidiary Ramp-Up & Consolidated Margins

• Three subsidiaries are scaling in parallel: Multitech is running at full capacity with margins up 200 bps YoY and a 20% balance-sheet growth target this year. JMT begins partial production in May and full production in July, targeting INR 100–150 Crores of topline. ACIL has started manufacturing and targets INR 120 Crores of sales this year.
• Consolidated margin commitment: Management expects at least 150 bps of consolidated margin improvement this year, driven by operating leverage as these subsidiaries scale and the export mix shifts.
• Capex stays elevated: Consolidated capex is pegged at INR 400-plus Crores this year, covering standalone capacity additions, the Mexico venture, and brownfield activity in the current plant.

Domestic Softness & the Auto/Non-Auto Rebalance

• Domestic revenue declined on CV weakness: Domestic revenue fell both YoY and sequentially, driven by a considerable slowdown in commercial vehicles including LCVs, plus inventory reduction at OEMs and lower OEM sales in January through March.
• The long-term mix shift is on track: Management reaffirmed the target of 70:30 auto/non-auto first, then 60:40 over four to five years, with railway as the biggest growth element in the next two to three years. Blended margin guidance tied to this shift remains intact.
• Volume growth guided at 15–20%: Consolidated volume growth of 15–20% is expected for the coming year, against an industry growth estimate of 10–12%.

Guidance & Commitments

Key Metrics