Divgi Torqtransfer Systems Limited — Investor Meet, 21-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** Divgi TorqTransfer Systems saw a total income of INR 119 crores for H1 FY '25, down 12% year-over-year due to reduced volumes from major OEM customers. The transfer case business recorded a 29% decline in revenue, while the EV transmission segment grew by 25%. The company's EBITDA stood at INR 31 crores, down 17% year-on-year, leading to a margin of 25.7%. Profit after tax fell 35% to INR 14 crores, resulting in PAT margins of 11.6%. In Q2 FY '25, total income was INR 59 crores, a 19% drop from the same quarter last year but flat sequentially. Q2 EBITDA rose 19% sequentially to INR 17 crores, with EBITDA margins improving to 28%. However, PAT decreased to INR 8 crores, reflecting a 27% decline year-over-year, but up 32% sequentially.

**Future Outlook and Growth Drivers:** Management is optimistic about H2 FY '25, anticipating a gradual recovery with an estimated revenue growth of 8-10% over H1. They expect export revenues to reach around 20% of total revenue by Q4 FY '25, with further growth predicted in FY '26 as new contracts stabilize.

**Order Book and Operational Updates:** The company has signed an MoU for a feasibility study to produce over 200,000 automatic transmissions in India, expected to be operational by 2027. Significant new export contracts were secured, particularly from China, signaling an uptick in international interest.

**Analyst Q&A Insights:** Analysts questioned the outlook for revenue and profitability, with management highlighting the importance of new contracts and improved margins as key factors. Concerns were raised regarding competitive threats, with management confident in their positioning due to strong relationships with major OEMs. Operational challenges, particularly in supply chain and component approvals, were noted, but management expressed confidence in handling these risks. Capex plans focus on expanding automatic transmission capabilities due to rising demand from OEMs looking to localize production.

**Market or Regulatory Updates:** The upcoming Bharat Mobility Global Expo 2025 marks a significant platform for introducing next-generation products. Management emphasized the need for alignment with government localization targets in the EV sector.

**Strategic Focus Areas:** The company is maintaining a strong focus on innovation within the hybrid and electric vehicle segments, alongside exploring opportunities in the global context of automotive manufacturing.

**Investor Insight:** Given the challenges reflected in recent financial results, the potential for recovery appears promising based on management’s initiatives and the improving export environment. The strategic focus on electric and automated solutions aligns with industry trends, indicating a likely positive trajectory. The current position suggests a ‘buy’ stance as new opportunities materialize and execution capabilities validate growth projections.