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Equity Bottom-Up

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.

Dowlais Group’s shares trade at a significant discount to our fair value. We have lowered our forecasts due to reduced expectations for automotive production and currency impact, but the key to unlocking value remains the group’s margin trajectory. We expect management to confirm that these targets (pre-central cost operating margin over 10% against 7.1% forecast for FY23) remain on track with the impending maiden set of results.

Dowlais Group’s shares trade at a significant discount to our fair value. We have lowered our forecasts due to reduced expectations for automotive production and currency impact, but the key to unlocking value remains the group’s margin trajectory. We expect management to confirm that these targets (pre-central cost operating margin over 10% against 7.1% forecast for FY23) remain on track with the impending maiden set of results.

Dowlais Group - Automotive production outlook softer

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 - 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

Dowlais Group - Automotive production outlook softer

Dowlais Group’s shares trade at a significant discount to our fair value. We have lowered our forecasts due to reduced expectations for automotive...

Edison Investment Research

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