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Softness in the automotive markets (see Stellantis’s recent update) is weighing on sentiment in the auto sector forecasts and has led us to trim our FY25 forecasts. Dowlais management is currently reviewing the options for its smaller Powder Metallurgy division. An exit would leave GKN Automotive dominated by the higher-quality Driveline business (60% of GKN Automotive sales) and its Chinese joint venture (JV). Assuming proceeds of c £700m (latest NAV £860m), this would leave the shares trading on a pro-forma FY25 EV/EBITDA of c 2x.

Softness in the automotive markets (see Stellantis’s recent update) is weighing on sentiment in the auto sector forecasts and has led us to trim our FY25 forecasts. Dowlais management is currently reviewing the options for its smaller Powder Metallurgy division. An exit would leave GKN Automotive dominated by the higher-quality Driveline business (60% of GKN Automotive sales) and its Chinese joint venture (JV). Assuming proceeds of c £700m (latest NAV £860m), this would leave the shares trading on a pro-forma FY25 EV/EBITDA of c 2x. 

Dowlais Group - Driveline - the strong core

Podcast by Andrew Walker, a PM at Rangeley Capital, Yet Another Value Podcast

Yet Another Value Podcast

Podcast by Andrew Walker, a PM at Rangeley Capital

Yet Another Value Podcast is a new podcast from Andrew Walker, the founder of yetanothervalueblog.substack.com/. We interview top investors and dive deep into stocks and companies they are currently working on and investing in. While nothing on this channel is investing advice and everyone should do their own diligence, our goal is to frequently feature edgy and actionable value and/or event driven ideas. Please see our legal and disclaimer at: https://yetanothervalueblog.substack.com/p/legal-and-disclaimer

<ul><li>Dowlais is a UK-listed auto parts business worth 820 million GBP with a core business in GKN auto and the non-core business in GKN powder Metallurgy.</li><li>The company was spun off from Melrose Industries in 2020 and is currently undergoing a strategic review to potentially sell off the powder Metallurgy business, which could be worth over 1 billion GBP.</li><li>Dowlais's core auto business is a global market leader in auto components and the potential sale of the powder Metallurgy business could exceed the company's current market cap.</li></ul>This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

Dowlais is a UK-listed auto parts business worth 820 million GBP with a core business in GKN auto and the non-core business in GKN powder Metallurgy.The company was spun off from Melrose Industries in 2020 and is currently undergoing a strategic review to potentially sell off the powder Metallurgy business, which could be worth over 1 billion GBP.Dowlais's core auto business is a global market leader in auto components and the potential sale of the powder Metallurgy business could exceed the company's current market cap.This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

Value Situations' Conor Maguire on Why Strategic Review at Dowlais $DWL.L Indicates a Live Catalyst

Weaker global automotive production in 2024 is proving a challenge for Dowlais Group. Benefits from the restructuring programme and market recovery in 2025/26 should still see target double-digit margins achieved, driving earnings and cash generation. More important in the short term is the announced strategic review of Powder Metallurgy (PM). This could offer a step change in the market’s appreciation of the value of the company’s portfolio of assets.

Weaker global automotive production in 2024 is proving a challenge for Dowlais Group. Benefits from the restructuring programme and market recovery in 2025/26 should still see target double-digit margins achieved, driving earnings and cash generation. More important in the short term is the announced strategic review of Powder Metallurgy (PM). This could offer a step change in the market’s appreciation of the value of the company’s portfolio of assets.

Dowlais Group - Powder Metallurgy in the spotlight

Dowlais Group’s traditional automotive and powder metallurgy operations continue to outperform the market, albeit the slowdown in EV adoption has affected ePowertrain, leading to a marginal reduction in expectations. However, the key remains further progress in operating margins (6.1% in the period, up 30bp) on the journey to c 10%. This margin expansion should drive earnings momentum and subsequently share price performance.

Dowlais Group’s traditional automotive and powder metallurgy operations continue to outperform the market, albeit the slowdown in EV adoption has affected ePowertrain, leading to a marginal reduction in expectations. However, the key remains further progress in operating margins (6.1% in the period, up 30bp) on the journey to c 10%. This margin expansion should drive earnings momentum and subsequently share price performance.

Dowlais Group - Margin expansion despite mixed auto markets

Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger costs. Softer automotive markets will limit margin progress in FY24 towards the double-digit target. Despite this, margins of c 6.5% are still ahead of automotive peers, although the shares trade at a significant discount to our implied generic peer-based valuation.

Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger costs. Softer automotive markets will limit margin progress in FY24 towards the double-digit target. Despite this, margins of c 6.5% are still ahead of automotive peers, although the shares trade at a significant discount to our implied generic peer-based valuation.

United Kingdom

Dowlais Group PLC operates as an engineering specialist. The Company offers automotive drive systems, powder metallurgy, and metal hydride technology solutions. Dowlais Group serves clients in the United Kingdom.

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Dowlais Group (DWL LN)

Dowlais Group - Driveline - the strong core

Softness in the automotive markets (see Stellantis’s recent update) is weighing on sentiment in the auto sector forecasts and has led us to trim...

Edison Investment Research

Value Situations' Conor Maguire on Why Strategic Review at Dowlais $DWL.L Indicates a Live Catalyst

Tigus offers in-depth industry and company analysis through their research platform, providing valuable insights and a crystal clear view of...

Yet Another Value Podcast

Dowlais Group - Powder Metallurgy in the spotlight

Weaker global automotive production in 2024 is proving a challenge for Dowlais Group. Benefits from the restructuring programme and market recovery...

Edison Investment Research

Dowlais Group - Margin expansion despite mixed auto markets

Dowlais Group’s traditional automotive and powder metallurgy operations continue to outperform the market, albeit the slowdown in EV adoption has...

Edison Investment Research

Dowlais Group - Motoring forward

Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger...

Edison Investment Research

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