Buy Happy Forgings; target of Rs 1200: Motilal Oswal

Motilal Oswal's research report on Happy Forgings

One of the key investor concerns for Happy Forgings (HFL) has been its subdued revenue growth over the past few quarters, despite a strong order backlog, which is also reflected in the stock’s underperformance over the past 12M relative to the broader index. Notably, this slowdown in revenue growth has largely been led by its exposure to overseas markets, which are currently experiencing a marked slowdown. While demand outlook in key export markets continues to remain weak, we expect HFL’s revenue to start picking up from the coming quarters, driven by: 1) an expected pickup in the domestic CV and PV business following the GST rate cuts, 2) the positive outlook for domestic tractors, 3) new order wins in key segments, including Industrials, 4) and stabilization of demand in Europe/US for CVs and tractors, albeit at lower levels.

Outlook

Overall, we expect HFL to post a CAGR of 17%/20%/22% in standalone revenue/EBITDA/PAT during FY25-28. We reiterate our BUY rating on the stock with a TP of INR1,200 (based on 27x Sep’27E EPS).