Varroc Engineering's revenue was up 6% YoY at Rs 22 billion with ~8% YoY growth in India operations. Overseas growth lagged (down 18% YoY) due to macro weakness.
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Varroc Engineering Ltd.'s Ebitda margin stood at 9.2%, down ~80bps YoY (vs consensus/our estimate of 9.8%/9.7%). Revenue growth was ~6% YoY, with ~8% YoY growth in India operations.
Overseas operations remained under pressure due to macro weakness.
Varroc Engineering expects a gradual recovery in its overseas business over the next one–two years, with recent order wins.
We have factored in 12% revenue CAGR over FY25–28E, led by growth in the two-wheeler segment and ramp-up of new order wins.
We expect Ebitda margin to improve to ~10.5%/10.7% in FY27E/FY28E. Maintain Buy, with a DCF-based target price of Rs 745 (earlier Rs 690), implying ~20 times FY28E earnings per share.
Downside risks
Slower-than-expected growth in domestic two-wheeler market.
Unable to add large e-two-wheeler OEMs apart from Bajaj Auto as customers.
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