For 2QFY2016, MM Forgings (MMFL) reported disappointing numbers on the topline and bottom-line fronts. The top-line during the quarter grew marginally by 1.8% yoy to Rs128cr. The raw material cost declined by 111bp yoy to 38.2% of sales, but the benefits were offset by an increase in employee and power costs. Employee and power costs rose by 162bp yoy and 17bp yoy to 11.1% and 10.4% of sales, respectively. As a result, the EBITDA margin witnessed a slight decline of 37bp yoy to 21.9%. The other income came in at Rs1.3cr vs Rs0.4cr in 2QFY2015. The net profit remained flat at Rs13cr. Sufficient capacity to cater to improving demand across the globe: MMFL is in the midst of increasing its capacity to 65,000MT, which should be in place by 4QFY2016. The company mainly caters to global markets (Europe and USA) with a focus on the commercial vehicle (CV) industry. The company is witnessing healthy demand from USA and we expect demand from the region to remain intact over the next 12-15 month period. We expect demand from Europe to be subdued in the near term and recover thereafter. Additionally, appreciation of the USD against the INR will provide a boost...