PL Stock Report: Divgi Torqtransfer Systems (DIVGIIT IN) - Visit Update - Niche ICE player and pioneer in EV transmission - Not Rated

Divgi Torqtransfer Systems (DIVGIIT IN) - Himanshu Singh - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: Not Rated | CMP: Rs950 | TP: NA

Visit Update - Niche ICE player and pioneer in EV transmission

Quick Pointers:

♦ Strong orderbook from major EV OEMs for EV transmission.

♦ Tailwinds in exports to boost growth.

We visited Divgi TorqTransfer Systems (DTTS) facilities in Pune and observed production of Transmissions systems specifically designed for electric vehicles (EVs), Transfer Cases and transmission components. DTTS is a system-level provider offering a range of transmission solutions. DTTS is strongly focused on localizing and scaling its exports business. The company has pioneered EV transmission products in India and successfully localized the technology, thereby replacing export dependence of its customers. It is also considering development of 3-in-1 integrated electric drive units. The company is actively working on diversification of its customer portfolio to mitigate dependence on a single product and customer.

We believe DTTS is well-positioned to decrease its reliance on a single product and expand its customer base, as the EV transmission segment begins to ramp-up volumes along with expectations of exports uptick. We see DTTS having strong engineering and manufacturing capabilities and take note on the healthy progression of EV transmission business. The company aims to double revenues by FY25, with growth being derived from the transfer case business from MG Motors (customer added in FY22) and EV transmission business with Tata Motors which started in 1QFY24. DTTS is currently trading at 35.7x FY23 EPS. Not rated.

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