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Centrum Broking Report
We recently interacted with the management of Divgi Torqtransfer Systems Ltd. We understood that the revenue headwinds are receding fast.
The scheduled execution of the order inflow announced in Q2 FY24 has started. The execution of Electric Vehicle Transmission and related component picked up in Q4 FY24. Divgi Torqtransfer Systems has started EVT supply for Tata Punch from Jan-24.
The company is trying for customer diversification in EVT business and is working on various request for quotes on system and component level across the globe. We maintain FY23-26E revenue compound annual growth rate of 31% and profit after CAGR of 30% for Divgi.
Ebitda margin and return on equity estimated to improve progressively to 27.7% and 16.2% respectively by FY26E. We believe current decline in the stock price provides higher margin of safety. We maintain a Buy with target price of Rs 1,283 (35 times FY26E earnings per share of Rs 36.7).
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