At a Glance
Samrat Forgings Ltd (SFL) just dropped its Q1 FY26 results, and investors are scratching their heads. Revenue came in at ₹50.6 Cr (-2% QoQ), and PAT limped to ₹1.05 Cr (-18% QoQ). Margins remained modest at 8.5% and the interest costs continued to nibble away at profits. At ₹303, the stock trades at a pricey 31.5x P/E, signaling the market expects miracles from this small-cap steel bender.
Introduction
When you hear “forgings,” you imagine giant machines pounding steel to perfection. At SFL, the pounding is real, but so is the pressure on its financials. The company has impressive certifications and a “zero defect” supplier tag, yet its profits swing like a rusty pendulum. Despite a strong promoter holding (74.98%), the lack of dividends and rising debt weigh on sentiment. In a sector buzzing with Happy Forgings and Balu Forge’s rapid growth, SFL needs more than just certifications – it needs scale.
Business Model (WTF Do They Even Do?)
Samrat Forgings manufactures closed die steel forgings and machined components for:
- Automotive OEMs: Trucks, tractors, and commercial vehicles.
- Non-Automotive: Industrial machinery, oil & gas parts.
Revenue is derived from machining contracts and forged components. While the niche is solid, dependence on a limited client base and modest scale limit pricing power. Unlike larger peers, SFL lacks export dominance or high-value-added segments.
Financials Overview
Q1 FY26 snapshot:
- Revenue: ₹50.6 Cr (-2% QoQ, +12% YoY)
- Operating Profit: ₹4.3 Cr (OPM 8.5%)
- PAT: ₹1.05 Cr (-18% QoQ)
- EPS: ₹2.1
FY25 full-year numbers:
- Revenue: ₹196 Cr (+20%)
- PAT: ₹5 Cr (flat)
- OPM: 9%
Growth is present but fragile. The interest coverage ratio remains low, reflecting debt pressure.
Valuation
1. P/E Method
Industry P/E ~30x
EPS (TTM) ₹9.6
Fair Value = 30 × 9.6 = ₹288
2. EV/EBITDA
Peer EV/EBITDA ~10x
EBITDA FY25 ₹18 Cr
EV ≈ ₹180 Cr
Equity value ≈ ₹155 Cr
Fair Value ≈ ₹295
3. DCF
Assuming 10% growth, 12% discount rate
Intrinsic Value ≈ ₹300
Fair Value Range: ₹285 – ₹300
(Current price ₹303: fully priced)
What’s Cooking – News, Triggers, Drama
- Q1 FY26 shows volume growth but margin compression.
- No dividend payout policy yet.
- Focus on machining expansion may improve margins.
- Peers expanding aggressively; SFL risks staying niche.
Balance Sheet
| (₹ Cr) | Mar 2025 |
|---|---|
| Assets | 180 |
| Liabilities | 138 |
| Net Worth | 37 |
| Borrowings | 89 |
Auditor’s Take: Balance sheet looks like a college student’s wallet – lots of IOUs (debt), little cash.
Cash Flow – Sab Number Game Hai
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Ops CF | 16 | 17 | 20 |
| Investing CF | -23 | -21 | -21 |
| Financing CF | 8 | 3 | 1 |
Comment: Positive ops cash but all sucked into capex – classic small-cap reinvestment story.
Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 14.8% |
| ROCE | 11.9% |
| P/E | 31.5 |
| PAT Margin | 2.5% |
| D/E | 0.59 |
Verdict: Margins thin, leverage moderate – valuation too rich for current returns.
P&L Breakdown – Show Me the Money
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 179 | 161 | 196 |
| EBITDA | 15 | 13 | 18 |
| PAT | 5 | 3 | 5 |
Comment: Revenue growth saves face, but profit growth? Still forging ahead slowly.
Peer Comparison
| Company | Rev (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| AIA Engineering | 4,287 | 1,060 | 28.4 |
| Balu Forge | 924 | 204 | 34.1 |
| Happy Forgings | 1,409 | 268 | 33.4 |
| Samrat Forgings | 196 | 5 | 31.5 |
Roast: Valued like its bigger brothers, but delivering toddler-sized profits.
Miscellaneous – Shareholding, Promoters
- Promoters: 74.98% (rock solid)
- DIIs: 3.3%
- Public: 21.7%
High promoter stake is comforting but also limits liquidity.
EduInvesting Verdict™
Samrat Forgings is a niche player with certifications, steady revenue growth, and loyal OEM customers. However, its scale is tiny, margins are modest, and the stock is priced like a growth star. Without aggressive expansion or margin boost, the market may eventually demand a discount.
SWOT Analysis
- Strengths: Certifications, OEM relationships, promoter commitment.
- Weaknesses: Low margins, small scale, no dividends.
- Opportunities: Export markets, value-added machining.
- Threats: Rising input costs, bigger peers eating market share.
Final Word: SFL is forging ahead – but at a slow pace. At current valuations, it’s more of a hold-forged-metal than a shiny investment.
Written by EduInvesting Team | 30 July 2025
SEO Tags: Samrat Forgings, Q1 FY26 Results, Small Cap Forging Stock, Auto Components
