NSE: RKFORGE· AutomobileCyclical · Aug 26Small cap

Ramkrishna Forgings

Cyclical: post write-off recovery

Last close
₹714.65
29 Sept 2026 · reference
1D · 1M
+1.6% · −4.9%
price-only
Weight
2.1%
31 Jul 2026 · Aug rank 19
Thesis review
8 Sep 2026
Why We Own, p57
Coverage owner: Research (per book); latest results Q Jun-26Screener ↗Tijori ↗NSE ↗
Thesis map

Cyclical: post write-off recovery — what has to happen, what we believe, what breaks it

Catalysts
  • First commercial wheel dispatches from the Gummudipoondi JV (production started Aug-2026) and revenue recognition from Q2/Q3FY27.
  • Q2FY27 results (Nov-2026): sustaining 17-18% EBITDA margin and 70%+ utilisation would confirm the FY28 earnings normalisation.
  • Closure of the independent inventory root-cause study and a clean FY27 audit opinion; Rs 204.75 cr promoter warrant conversion showing promoter commitment.
Thesis pillars
  • Earnings trough is behind: Q1FY27 EBITDA margin rebounded to 18.0% (from 13-15% through FY26) and PAT nearly quadrupled to Rs 47 cr; management guides exports to ~35% of FY27 revenue and 40% by FY28 after a 19.9% export fall in FY26.
  • Railway wheel JV (51% RKFL / 49% Titagarh, Gummudipoondi) started production in Aug-2026 with 2.28 lakh wheel capacity, ~Rs 2,000 cr investment and a 20-year Indian Railways offtake (first year 40,000 wheels scaling to 80,000) - a non-CV, annuity-type earnings stream.
  • Operating leverage: Rs 1,500-1,700 cr capex over two years is only 68% utilised; management targets 70-80% utilisation by FY27, which drives Buoyant's PE compression from 181x FY27e to 37.8x FY28e.
  • Diversification away from CVs: PV order wins Rs 228 cr and 2W Rs 50 cr in Q1FY27, castings ramp-up, and new non-ferrous forgings for aerospace/semiconductor; automotive to be 70-75% of revenue in 3-4 years.
  • Cheaper than forging peers on recovery earnings: 37.8x FY28e vs Bharat Forge 93.5x TTM and Happy Forgings 64x TTM.
Position
  • Cyclical · Small cap
    2.1% of PMS · rank 19
Risks
  • Governance: Rs 220.5 cr inventory shortages (net Rs 202.6 cr, 6.73% of net worth) were discovered in the FY25 physical count (disclosed 26-Apr-2025); auditors S.R. Batliboi / S.K. Naredi gave a modified opinion on FY25; a root-cause report was pending - any further findings would hit credibility.
  • Leverage rising: FY26 net debt +17% to Rs 1,639 cr (ND/E 0.50x), finance cost +20% to Rs 176 cr and a Rs 42 cr ECL provision on receivables; screener flags low interest coverage.
  • Slow CV cycle (FY27 M&HCV +1-3% per ICRA) and US tariff uncertainty could delay the export recovery on which the 35-40% export-mix target depends.
Structured investment memo

Thesis and position rationale

Investment case
Cyclical: post write-off recovery
Why this business

Ramkrishna Forgings is a Jamshedpur-based forgings maker (one of India's largest) supplying axle, transmission and chassis forgings mainly to commercial-vehicle OEMs in India, North America and Europe, and diversifying into railways (51:49 forged-wheel JV with Titagarh, 2.28 lakh wheels/yr, 20-year Indian Railways contract), castings, oil & gas, passenger-vehicle and non-ferrous aerospace forgings. Exports were 32% of Q1FY27 revenue (N. America Rs 222 cr, Europe Rs 128 cr); capacity utilisation ~68%.

What we believe
  1. 01Earnings trough is behind: Q1FY27 EBITDA margin rebounded to 18.0% (from 13-15% through FY26) and PAT nearly quadrupled to Rs 47 cr; management guides exports to ~35% of FY27 revenue and 40% by FY28 after a 19.9% export fall in FY26.
  2. 02Railway wheel JV (51% RKFL / 49% Titagarh, Gummudipoondi) started production in Aug-2026 with 2.28 lakh wheel capacity, ~Rs 2,000 cr investment and a 20-year Indian Railways offtake (first year 40,000 wheels scaling to 80,000) - a non-CV, annuity-type earnings stream.
  3. 03Operating leverage: Rs 1,500-1,700 cr capex over two years is only 68% utilised; management targets 70-80% utilisation by FY27, which drives Buoyant's PE compression from 181x FY27e to 37.8x FY28e.
  4. 04Diversification away from CVs: PV order wins Rs 228 cr and 2W Rs 50 cr in Q1FY27, castings ramp-up, and new non-ferrous forgings for aerospace/semiconductor; automotive to be 70-75% of revenue in 3-4 years.
  5. 05Cheaper than forging peers on recovery earnings: 37.8x FY28e vs Bharat Forge 93.5x TTM and Happy Forgings 64x TTM.
Why now

TTM PE 112x is optically inflated by the FY26 earnings trough (PAT -78%); 5-yr stock price CAGR not captured; P/B 3.9x vs ROE of 2.5% (3-yr avg 9.75%) - the stock is priced on FY28 recovery (Buoyant 37.8x FY28e). EV/EBITDA n.m.; dividend yield 0.1%.

Market disagreement
  • Bharat Forge: Bharat Forge trades at 93.5x TTM PE / 9.8x P/B with ROE 12% and a Rs 90 cr Q1FY27 loss on Rs 7,309 cr debt; RKFL at 3.9x P/B offers more torque to a CV/export recovery plus the railway wheel option.
  • Happy Forgings: Happy Forgings is the higher-quality name (ROE 15%, net debt Rs 330 cr, Q1 PAT +42%) but is priced for it at 64x TTM PE and 9.9x P/B vs RKFL 3.9x P/B; RKFL is the mean-reversion trade, Happy the compounder.
Position sizing

Cyclical Small cap  2.1% of the PMS on $31 Jul 2026 (August rank 19). Satellite positions are owned for an asymmetry, sized up when the cycle rewards risk and reduced when it does not.

Catalysts
  • First commercial wheel dispatches from the Gummudipoondi JV (production started Aug-2026) and revenue recognition from Q2/Q3FY27.
  • Q2FY27 results (Nov-2026): sustaining 17-18% EBITDA margin and 70%+ utilisation would confirm the FY28 earnings normalisation.
  • Closure of the independent inventory root-cause study and a clean FY27 audit opinion; Rs 204.75 cr promoter warrant conversion showing promoter commitment.
Risks and response
  • Governance: Rs 220.5 cr inventory shortages (net Rs 202.6 cr, 6.73% of net worth) were discovered in the FY25 physical count (disclosed 26-Apr-2025); auditors S.R. Batliboi / S.K. Naredi gave a modified opinion on FY25; a root-cause report was pending - any further findings would hit credibility.
  • Leverage rising: FY26 net debt +17% to Rs 1,639 cr (ND/E 0.50x), finance cost +20% to Rs 176 cr and a Rs 42 cr ECL provision on receivables; screener flags low interest coverage.
  • Slow CV cycle (FY27 M&HCV +1-3% per ICRA) and US tariff uncertainty could delay the export recovery on which the 35-40% export-mix target depends.
Thesis-break conditions
Not stated separately on this page; the risk list carries the monitoring triggers.
Review history
  • 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p57) · portfolio as of $31 Jul 2026
  • 31 Aug 2026 · Classification in the August top-30: Cyclical

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p57. Internal; external publication of these fields is controlled by audience policy.

Decision log

Internal actions

  • HoldPosition carried into August at rank 19.
  • ReviewNext scheduled: post 2QFY27 results (Oct–Nov 2026).

Add/trim/exit decisions require transactions data; none supplied. Recording a decision needs a persistence adapter (not configured).

Evidence

Sector datapoints

  • Indian CV cycle: FY26 retail volumes grew 12.4% (LCV) and 10.1% (M&HCV); ICRA forecasts FY27 CV wholesale growth of only 4-6% (M&HCV trucks 1-3%, LCV 6-8%, buses 7-9%) - a mature, late-cycle market (Business Standard, Jun-2026).
  • May-2026 CV wholesales +13.5% YoY but retail -18.3% MoM; headwinds cited: higher fuel prices, financing delays, commodity inflation.
  • Exports: RKFL FY26 export revenue -19.9% to Rs 1,187 cr on weak North American Class-8 demand and tariff uncertainty; Q1FY27 exports +11% YoY signalling bottoming.
  • Indian Railways wheel localisation: RKFL-Titagarh JV holds a 20-year contract for up to 80,000 wheels/yr of the 2.28 lakh capacity (Whalesbook, Jul-2026).