MM Forgings (MMFG) Q3FY21 result was ahead of our estimates on all parameters except EBITDA margin which stood at 15.2% versus our estimates of 17.6% due to lower export sales and relatively higher operating expenses. Currently revenue contribution from export market for MMFG is 52% whereas NA/European contributes 20%/22% respectively.

IDBI Capital Markets & Securities maintains Buy rating on MM Forgings with target price of Rs 600 (earlier Rs 380) based on PER of 12x FY23E EPS.

The brokerage firm believes NA/European market hit hard due to COVID-19 and recently announced lockdown in European countries and possible lockdown in US region would impact Q4FY21 numbers.

Further, it raises revenue/EBITDA estimates by 18%/19% and 11%/27% for FY22/FY23 factoring the stronger recovery from domestic PV/CV segment and export markets like Europe/NA region.

The broking firm expects revenue/earnings to grow at 7%/40% CAGR over FY20-FY23E with EBITDA margin of 18%. "We have arrived FY23E EPS at Rs 49.8, factoring strong recovery from export/domestic market and better tonnage/ realizations growth."  

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