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Target: ₹1,135
CMP: ₹843.75
We cut our FY24/25/26E EPS by 9/15/11 per cent, to factor in headwinds at legacy business and slower than expected ramp-up of the EV segment. Divgi Torqtransfer’s revenue was below our estimates (by 12 per cent), led by weakness across segments except components. Divgi noted that it lost ₹16 crore in revenue due to market headwinds at its principal customer accounts (Transfer case / EV / Defense).
EBITDA margin at 20.5 per cent was flat q-o-q and came 110bps below our estimates due to lower operating leverage. Restructuring at MG Motor and Tata Motors prioritising models where Divgi 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.
Divgi is expected to benefit from increased leisure purchase and preference for more features and safer vehicle should increase demand for 4WD PV, first mover advantage led by quick ramp-up in EV transmission business backed by strong order book from Indian EV OEMs and recovery in exports business aided by entry in new geographies, products and new orders.
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