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ICICI Securities Report
Varroc Engineering Ltd.'s Ebitdam stood at 11.2%, up ~190 bps QoQ, and 90 bps higher than consensus estimate in Q4 FY24, though reported margin included multiple one-offs, including retrospective incentives and provisions from specific EV customer.
On an adjusted basis, Ebitdam for FY24 stood at ~9.5%, as per the management. New lifetime order win in FY24 stood at Rs 87 billion – with split of 19% / 81% in four-wheeler / (two-wheeler and three-wheeler) segments, respectively, with ~43% coming from EV models.
We have factored-in 15% revenue CAGR and ~11.4% average Ebitda margin for FY24-26E.
Upgrade Varroc to BUY from Add with a revised DCF-based target price of Rs 738 (earlier: Rs 637), implying ~21 times FY26E EPS.
Change in target price is led by 1%/2% higher EPS on 30 bps/50 bps higher Ebitdam in FY25/26E and earnings rollover.
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