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 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.