Buy Varroc Engineering, target price Rs 365: ICICI Securities

ICICI Securities has buy call on Varroc Engineering with a target price of Rs 365. The current market price of Varroc Engineering is Rs 293.5.

Varroc Engineering Ltd., incorporated in the year 1988, is a Mid Cap company (having a market cap of Rs 4484.28 Crore) operating in Auto Ancillaries sector.

Varroc Engineering Ltd. key Products/Revenue Segments include Electrical Motors & Spares, Steel Forgings, Auto Parts, Polymer Products, Tools, Other Operating Revenue, Wind Power, Job Work for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-09-2022, the company reported a Consolidated Total Income of Rs 1846.57 Crore, up 12.78 % from last quarter Total Income of Rs 1637.34 Crore and down -39.31 % from last year same quarter Total Income of Rs 3042.48 Crore. Company reported net profit after tax of Rs -795.17 Crore in latest quarter.


Investment Rationale
With more than a third of its orderbook from EV players, VAR is focused on profitable growth with superior RoCE from its EV portfolio (traction motor, controller, DC-DC converter, etc.) Maintain BUY with a DCF-based target price of Rs365, implying ~18x FY24E EPS.

Promoter/FII Holdings
Promoters held 75.0 per cent stake in the company as of 30-Sep-2022, while FIIs owned 3.28 per cent, DIIs 14.31 per cent.