MM Forgings’ (MMFL) EBITDA grew by 19% y/y to Rs750m in Q1FY27, above our estimate of Rs659m, due to more-than-expected gross margin, other operating income and DVS merger. Looking ahead, we expect its revenue/EBITDA to clock 16/22% CAGR over FY26-28e, led by: (a) expected 8% CAGR in domestic M&HCV volume over FY26-28e on improved economic activities and better replacement/small transporter demand on GST reforms; (b) likely re-bound in overseas CV sector in FY27/28e on low base, new order wins and early buying before emission norms; and (c) higher-than-the-industry revenue growth due to new orders, products, 16,500 press ton utilisation and higher machining/heavy forging-mix. At CMP, the stock trades at a reasonable valuation of 22/17x FY27/28e EPS in comparison to other listed peers in ancillary space. We maintain BUY rating on the stock with an upwardly revised TP of Rs840 (from Rs600 earlier), valuing it at 21x FY28e EPS (vs. 16x FY28 EPS previously). Our multiple is +1std of the past 10-year average.

EBITDA Exceeds Estimates: Post NCLT approval for merger of wholly owned subsidiary of DVS Industries (machined crankshaft subsidiary) into company on 29th of Jun-26, the company has restated the past numbers. Standalone revenue grew by 16% y/y to Rs4.2bn (above our estimate of Rs3.9bn). While domestic grew 20%, exports rose by 9% (USA up ~31%, South America ~16%, Europe down ~4%, and Others down ~42%). Other operating income grew 42% y/y to Rs106m. EBITDA grew 19% y/y to Rs750m, above our estimate Rs659m, due to higher-than-expected gross margin, other operating income and DVS merger. EBITDA margin expanded by 40bps y/y (down 110bps q/q) to 17.9% (vs. our estimate of 16.9%). Tax rate fell to 2.5% in Q1FY27 from 30.5% in Q1FY26, due to tax adjustments of Rs61m for earlier years. Overall, PAT surged by 83% y/y to Rs354m, above our estimate of Rs199m, mainly due to higher operating profit and lower tax.

Management Commentaries: (a) The management expects revenue to grow by ~18% y/y to Rs18-19bn in FY27e; (b) It sees FY27 volume 90,000, which stood at 20,200 tonne in Q1FY27; (c) The management sees strong demand across CV, PV and tractors in India, while utilisation across forging and machining lines remains at optimum level; (d) US business witnessed strong growth in Q1FY27, led by Class-8 demand; (e) Looking ahead, the management targets EBITDA margin of 20%, on the back of productivity gains, automation and scale.

Outlook and Valuation: At CMP, the stock trades at 22/17x FY27/28e EPS, which is a notable discount to other listed peers in ancillary space. We raise our EPS estimate by ~5-7% for FY27/28e, due to DVS merger and higher revenue/margin estimates. Thus, we maintain BUY rating on the stock with an upwardly revised TP of Rs840 (from Rs600 earlier), valuing it at 21x FY28e EPS (vs. 16x FY28 EPS previously). Our multiple is +1std of the past 10-year average.

Key Risks: (a) Muted growth in underlying segments; (b) delay in order execution; (c) higher RM prices; and (d) adverse forex movement.