New Production Capacity And Advanced Forgings Will Drive Global Infrastructure

Key Takeaways

• Expansion into lightweight and advanced forgings positions the company to benefit from global shifts in automotive and infrastructure sectors, supporting diversification and future growth.
  
• Improved margins and earnings quality are expected as new capacities ramp up, export markets stabilize, and product lines shift toward value-added offerings.
  
• Exposure to tariffs, volatile input costs, delayed EV diversification, rising capex, and global supply chain disruptions threaten revenue growth, margins, and long-term financial resilience.

Catalysts

Engages in the manufacture and sale of forged components for automobiles, railway wagons and coaches, and engineering parts in India and internationally.

• Enhanced capacity expansions, including the addition of an 8,000-tonne press line and 3,000-tonne aluminum forging facility, are set to come online in FY '26, positioning the company to benefit from expected long-term increases in global infrastructure and transportation investments-providing a runway for topline revenue growth once demand recovers.
  
• Strategic moves into advanced lighter-weight and nonferrous (aluminum) forgings will enable the company to capture market share as automakers globally accelerate their shift toward electric and hybrid vehicles-supporting diversification, future-ready product lines, and safeguarding long-term revenue streams.
  
• Robust order inflow, with a sizeable portion from export markets (notably Europe and North America), demonstrates continued success in client diversification and international market penetration, setting the stage for sustained revenue and earnings growth as export headwinds ease.
  
• Gradual margin recovery is likely as raw material price pressures normalize, operational leverage from new capacity utilization increases, and cost-reduction initiatives continue-driving improvements in operating and net margins over the next several quarters.
  
• The ramp-up of new value-added product lines, such as fully assembled undercarriage systems for Indian Railways, and the scaling of the castings business (with high secured utilization), bolster revenue visibility while reducing dependence on cyclical segments and enhancing earnings quality.

Ramkrishna Forgings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ramkrishna Forgings's revenue will grow by 7.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.1% today to 10.3% in 3 years time.
• Analysts expect earnings to reach ₹5.2 billion (and earnings per share of ₹25.33) by about September 2028, up from ₹2.9 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 39.0x on those 2028 earnings, up from 35.9x today. This future PE is greater than the current PE for the IN Metals and Mining industry at 23.6x.
• Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.15%, as per the Simply Wall St company report.

Ramkrishna Forgings Future Earnings Per Share Growth

Risks

• Significant exposure to global tariffs-especially 25% on passenger vehicles and 10% on commercial vehicles imported to the US-creates uncertainty in the export revenue stream; the company's limited ability to fully pass these costs to customers could compress future revenues and net margins.
  
• High sensitivity to fluctuations in raw material prices and inventory valuation, particularly steel; inability to hedge steel costs and rapid pass-through to OEMs put downward pressure on realizations and cause margin volatility, impacting earnings stability.
  
• Ongoing reliance on traditional internal combustion engine (ICE) vehicle components for passenger vehicle order wins and slow ramp in new segments like EV-focused aluminum forging; secular shift to EVs (with structurally lower forging content per vehicle) and delayed diversification may reduce future addressable market and long-term revenue growth.
  
• Steady increase in capital expenditures, ongoing large-scale expansion projects, and high net debt (~₹1,800 crores), combined with margin pressure and lower profitability, could strain free cash flow and increase vulnerability during industry downcycles or periods of rising interest rates.
  
• Risks from global supply chain disruptions (e.g., continued China dependence for rare earths), increased regional sourcing, and potential for deglobalization may reduce export opportunities and drive up compliance and logistics costs, further affecting revenue predictability and net profit.

Valuation

• The analysts have a consensus price target of ₹747.833 for Ramkrishna Forgings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1111.0, and the most bearish reporting a price target of just ₹540.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹50.7 billion, earnings will come to ₹5.2 billion, and it would be trading on a PE ratio of 39.0x, assuming you use a discount rate of 14.1%.
• Given the current share price of ₹576.6, the analyst price target of ₹747.83 is 22.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.