Hold Divgi Torqtransfer Systems; target of Rs 632 Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Divgi Torqtransfer Systems with a target price of Rs 632 in its research report dated November 19, 2024.

Broker Research

November 19, 2024 / 14:09 IST

hold

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Divgi Torqtransfer Systems

We cut our estimates by 4-10% over the forecasted period to factor in the headwinds in the legacy Transfer Case business and near-term slowdown in EV business. Divgi Torqtransfer Systems Q2FY25 revenue remained flat sequentially, coming in 8.9%/10% lower than PLe/consensus estimates. Gross profit increased by 5.1% QoQ with a margin expansion of 318bps QoQ to 59.9%. EBITDA increased by 29.7% QoQ while margin improved by 489bps QoQ to 21% and PAT increased by 31.5% QoQ. The company notably improved its operational performance on sequential basis, aided by cost controlling measures as well as renegotiation with OEMs over the compensation for lower volume. The company outlined the pressure in the 4W drive may persist in FY25; however, it is building diverse range of products to offset the pressure in the business.

Outlook

Additionally, the company aims to derive ~20% of revenue from exports business from FY26 leading to expansion in revenue and margin trajectory. Given the persistent headwind in core business and slowdown in EV business domestically, we retain our “HOLD” rating with a TP of Rs 632 (previous Rs633), valuing it at a P/E of 36x on its Sept’26 EPS.

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