Buy Varroc Engineering; target of Rs 610: ICICI Securities

ICICI Securities research report on Varroc Engineering

Varroc Engineering’s (VAR) EBITDA margin stood at 10.5%, down ~70bps YoY but ~50bps higher vs consensus/I-Sec estimate. Revenue growth was 11% YoY (adjusted), with 13% YoY growth in India operations. Overseas operations remained under pressure due to macro weakness. It expects a gradual recovery in growth of its overseas business over the next 1–2 years, with recent order wins. We have factored in 10% revenue CAGR, led by growth in 2W segment and ramp-up of new order wins.

Outlook

We expect EBITDA margin to improve to ~10.4%/10.8% in FY26/27E, respectively. Maintain BUY with DCF-based revised target price of INR 610 (earlier INR 536), implying ~20x FY27E EPS.