| Q4 FY26 Earnings Conference Call
Summary : Kalyani Forge achieved record profitability and sustained high EBITDA margins, driven by strategic shift to high-value OEM products, new EV orders, and operational efficiency, while managing increased debt and working capital.
Management Perspective positive : We're very happy to share that we achieved a record high profit after tax for the entire year. We are quite happy with this result, and more confident of achieving more on the EBITDA front. We are targeting 20% EBITDA margin, which we hope to reach.
Concall Report Analysis & Insights
Business Overview
- Kalyani Forge achieved record high profit after tax for FY26.
- FY26 PAT was Rs. 9.32 crores, highest in 14 years.
- Q4 EBITDA margin reached 15.2%, second consecutive quarter.
- Core product groups are engine, driveline, and axle components.
- Phased out Rs. 40 crores of non-profitable business in FY26.
Future Growth Prospects
- Secured 3 major order wins in Q4, ramping up from Q1 FY27.
- New EV high-volume axle business worth Rs. 20 crores annual revenue.
- 60% of FY27 CAPEX allocated to new business and growth areas.
- Targeting 20% EBITDA margin by end of next financial year.
- Focus on profitable growth, cash conversion cycle reduction, ROCE improvement.
Management Insights
- Achieved record high profit after tax and sustained 15% EBITDA margin.
- Improved ROCE from 14% in Q1 FY26 to 18% in Q4.
- Focusing on core OEM customers and high-volume, high-margin products.
- Implementing operational efficiency and cost optimization initiatives.
- Strengthening supply chain and raw material planning systems.
Signs of Skepticism
- Q4 interest cost was low due to capitalization, not a sustained trend.
- Q3 PAT was near zero, Q4 PAT boosted by deferred tax reversal.
- Receivables increased faster than sales, stretching working capital.
- Order book number for new business remained same as Q3.
Risk Factors
- Forward-looking statements involve inherent risks and uncertainties.
- Debt-to-equity ratio increased due to growth CAPEX and working capital.
- Cash conversion cycle peaked at 176 days in Q2, now improving.
- Phasing out non-profitable businesses can impact short-term revenue.
- Deferred tax effects can impact quarterly PAT calculations.
Good To Know
- Reclassified dyes and toolings inventory into fixed assets for better policy.
- Vriddhi Council projects focus on supply chain, cost reduction, efficiency.
- New Plant Engineering vertical aims to improve plant layouts and architecture.
- Clean Audit Roadmap moved to Phase 2, hired external consultant.
- Company offers plant visits for interested shareholders.
Key Drivers
- New high-volume EV orders.
- Sustained 15% EBITDA margin.
- Strategic CAPEX for growth.
- Operational efficiency initiatives.
Key Analyst Discussions
Competitive Environment
- Focusing on OEMs provides better pricing and margins.
- Kalyani Forge is unique in offering engine, driveline, axle components to OEMs.
- New order wins are from OEM and Tier 1 customers in axle segment.
Financial Highlights
- Interest cost in Q4 was low due to capitalization of term loan for CAPEX.
- Maximum sales at current fixed asset level could be Rs. 300 crores.
- Receivables increased due to warehousing commitments for key OEMs.
- Targeting cash conversion cycle of 120-130 days from current levels.
- Other income includes export incentives and sale of obsolete assets.
Product Composition
- Driveline and axle are fast-growing, fuel-agnostic, future-proof products.
- Engine business is primarily heavy commercial vehicles and off-road.
- Product portfolio is simplified and focused for better profitability.
Strategic Considerations
- Phase 4 involves resource reallocation, aligning CAPEX to core customers.
- Strategic new order wins are in high-volume EV products.
- Operational efficiency initiatives include forging modernization and plant engineering.
- Strengthening supply chain and raw material planning systems is a key focus.
- Clean audit roadmap is progressing to improve governance and compliance.