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Prabhudas Lilladher Report
We cut our FY24/25/26E earning per share by 9%/15%/11%, to factor in headwinds at legacy business and slower than expected ramp-up of the electric vehicle segment. Divgi Torqtransfer Systems Ltd.'s revenue was below our estimates (by ~12%), led by weakness across segments except components.
Divgi Torqtransfer Systems noted that it lost Rs. 160 million in revenue due to market headwinds at its principal customer accounts (Transfer case / EV / Defense). Ebitda margin at 20.5% was flat QoQ and came ~110 basis points below our estimates due to lower operating leverage.
Restructuring at MG Motor India Ltd. and Tata Motors Ltd. prioritising models where the company doesn't have exposure during the quarter impacted volumes.
The company sees EV volume going back to Q2 levels given better demand from existing products and launch of Punch EV. Multiple order wins will start to go under execution and should help accelerate revenue growth in FY25E.
Retain ‘Buy' rating and target price of Rs 1,135 based on March-26 earning per share at 35 times price earning. The stock is trading at a P/E of 28 times on FY26E EPS.
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