Divgi Torqtransfer Systems Limited — Investor Meet, 20-02-2025: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** Divgi TorqTransfer Systems reported a total income of INR 176 crores for the first nine months of FY '25, a 13% decline year-over-year, impacted by lower sales volumes in the transfer case and EV transmission segments, which fell 32% and 13% respectively. However, the components segment saw a robust 46% growth. Gross margins improved to 63.2% from 61.1% due to effective pricing strategies. EBITDA decreased to INR 44 crores with a margin of 25%, and profit after tax (PAT) was INR 19 crores, down 38% year-on-year.

In Q3 FY '25, total income was INR 57 crores, a 15% decrease from the previous year. EBITDA was reported at INR 14 crores with a margin of 23.6%, while PAT fell to INR 5 crores, reflecting a 44% year-on-year decline.

**Future Outlook and Growth Drivers:** Management is optimistic about future performance, especially improvements in the transfer case business, boosted by stabilization of Mahindra's new models. They foresee gradual recovery starting in Q4 FY '25, with hopes for a more substantial rebound in FY '26 driven by international expansion and new product launches.

**Order Book and Operational Updates:** The company secured additional contracts to expand its EV transmission portfolio, including long-range versions for existing models. New export opportunities in the U.S. are anticipated to bolster revenue significantly, contributing an expected INR 90 crores annually from additional export components.

**Analyst Q&A Insights:** Analysts expressed concern over continuing declines in revenues. Management reassured that strategic corrective measures are in place, including the introduction of more competitive products and expansion into export markets, aiming for a 15% CAGR in revenues moving forward. Specific inquiries about capacity utilization revealed that production rates are currently low but generate substantial EBITDA margins.

**Market Updates:** Divgi's management highlighted the significance of recent awards from major OEMs, further enhancing the brand's reputation in the automotive industry. The global market focus is shifting towards localization, which the company plans to leverage for growth.

**Strategic Focus Areas:** The firm is pursuing innovation and product development in automatic and hybrid transmissions, indicating a commitment to evolve with market demands. Its partnerships with top suppliers enhance technological and operational capabilities.

**Investor Insight:** Given the focus on regaining revenue growth, bolstered by upcoming international contracts and an emphasis on efficiency, there is potential for a 'buy' position, especially with a long-term growth vision in place. The strategic initiatives could revive the company's profitability trajectory in the coming quarters.