Last close As at 06/08/2026
GBP0.94
— 0.00 (0.00%)
Market capitalisation
—
Research: Industrials
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 |
Trading update |
Automobiles and parts |
22 May 2024 |
Share price performance
Business description
Next events
Analyst
Dowlais Group is a research client of Edison Investment Research Limited |
||||||||||||||||||||||||||||||||||||||||||
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.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/22 |
5,246 |
212 |
(15.3) |
0.0 |
N/A |
N/A |
12/23 |
5,489 |
264 |
13.8 |
4.2 |
5.2 |
5.8 |
12/24e |
5,350 |
247 |
13.1 |
4.2 |
5.5 |
5.8 |
12/25e |
5,477 |
297 |
16.1 |
4.8 |
4.5 |
6.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading affected by EV slowdown
Trading for the first four months showed softer sales at £1.7bn, organic down 1.9%, but operating margin improvement of 30bp to 6.1%. Currencies also proved a headwind of c 5%, primarily the Chinese renminbi. Automotive revenue declined 3.3%, with traditional Driveline and the China JV positive and continuing to outperform the market, but more than offset by weakness in ePowertrain. The softness in battery electric vehicle (BEV) related business reflects the volatility being seen in the end-market, with EV growth having stalled, leading original equipment manufacturers to reduce schedules. Operating margins improved, despite volatility and volumes in ePowertrain, assisted by restructuring benefits and inflationary pass throughs. New business wins are in line with company expectations across ICE and BEV and support management’s medium-term operating margin target of 10%+. Powder Metallurgy posted organic sales growth of 4.0%, ahead of the market. This was driven by improved performance in its ICE-related business as it benefited from restocking in the period, and growth in the non-ICE-related portfolio. Operating margin improved, assisted by volume and restructuring in the North American business undertaken in H223.
Outlook: Margin progression/H2 weighting
Management expects FY24 organic sales to be slightly lower than FY23 and weighted to the second half, broadly in line with the market (S&P forecasts flat light vehicle production in 2024). With restructuring benefits, management expects to make progress towards its medium-term operating margin target of 10%+ and increase free cash generation. We have tweaked our forecasts to reflect the lower volumes (FY24 normalised PBT of £247m, down 5.4%, EPS of 13.1p, down 1.9%), but we now expect net debt to be £852m down from £929m due to lower capex.
Valuation: Significant discount to peers remains
Our generic drivetrain automotive peer group-derived valuation comes to 143p per share and our aspirational peer group of automotive stocks generating double-digit EBIT margins, in line with Dowlais management targets, comes to 182p.
Forecasts
Management guidance has been reduced from ‘similar to the prior year, at constant currency’ to ‘slightly below prior year at constant currency’. Performance is still expected to be weighted to the second half, assisted by both the market and new contracts coming into production. Clearly, this change reflects the impact of the EV slowdown. We would expect to have some drop through to the margin. Note that we already expected a currency headwind, which is potentially easing at today’s rates.
Exhibit 1: Forecast changes
2024e |
2025e |
|||||
£m |
Old |
New |
Change |
Old |
New |
Change |
Revenues |
5,482 |
5,350 |
(2.4%) |
5,612 |
5,477 |
(2.4%) |
Normalised operating profit |
370 |
356 |
(3.8%) |
417 |
406 |
(2.6%) |
Operating profit margin (ex-central costs) |
7.0% |
7.0% |
(0.1%) |
7.6% |
7.5% |
(0.0%) |
Reported operating profit |
64.9 |
51.6 |
(20.4%) |
151.1 |
141.2 |
(6.6%) |
Normalised PBT |
261 |
247 |
(5.4%) |
302 |
297 |
(1.7%) |
Normalised basic EPS (p) |
13.3 |
13.1 |
(1.9%) |
15.9 |
16.1 |
1.7% |
Dividend per share (p) |
4.2 |
4.2 |
0.0% |
4.8 |
4.8 |
1.7% |
Net cash/(debt) |
(929) |
(852) |
(8.3%) |
(875) |
(794) |
(9.3%) |
Source: Edison Investment Research
Valuation
Our preferred method for Dowlais Group is a peer-based valuation. Peer group 1 has drivetrain/powertrain operations along with other predominantly automotive activities. Peer group 2 comprises automotive stocks generating double-digit EBIT margins, in line with Dowlais Group’s management target. The average valuation using the generic peer group 1 comes to 143p a share (from 131p) and to 182p a share (from 181p) using the aspirational peer group 2.
Exhibit 2: Peer valuation
Market cap |
EV/EBIT (x) |
EV/EBITDA (x) |
P/E (x) |
EBIT margin |
||||||
£m |
2024 |
2025 |
2024 |
2025 |
2024 |
2025 |
2024 |
2025 |
||
Peer group 1 |
||||||||||
American Axle |
729 |
13.8 |
12.5 |
4.6 |
4.5 |
20.2 |
11.8 |
4.0% |
4.4% |
|
Dana |
1,605 |
8.7 |
7.3 |
4.4 |
4.0 |
12.0 |
8.1 |
4.3% |
4.9% |
|
Linamar |
2,559 |
5.0 |
4.7 |
3.2 |
3.0 |
6.9 |
6.3 |
8.7% |
8.9% |
|
Magna |
10,718 |
8.8 |
7.5 |
5.2 |
4.7 |
11.3 |
9.3 |
5.4% |
6.1% |
|
Valeo |
2,626 |
7.9 |
5.6 |
2.5 |
2.2 |
9.3 |
5.0 |
3.9% |
5.2% |
|
Vitesco |
2,378 |
6.4 |
4.6 |
2.6 |
2.2 |
10.8 |
7.8 |
4.2% |
5.6% |
|
Median |
8.3 |
7.3 |
4.4 |
4.0 |
10.8 |
8.0 |
4.3% |
5.6% |
||
Peer group 2 |
||||||||||
Autoliv |
8,025 |
9.6 |
8.2 |
7.2 |
6.3 |
12.8 |
10.4 |
10.7% |
11.9% |
|
Borg Warner |
6,612 |
8.3 |
7.5 |
5.9 |
5.4 |
9.0 |
8.0 |
9.4% |
9.7% |
|
Brembo |
3,003 |
9.5 |
8.5 |
5.9 |
5.4 |
11.6 |
10.2 |
10.7% |
11.3% |
|
Median |
9.1 |
8.1 |
6.3 |
5.7 |
11.1 |
9.5 |
10.3% |
11.0% |
||
Dowlais financials (EBIT, EBITDA, EPS) |
356 |
406 |
631 |
686 |
13.1 |
16.1 |
7.0% |
7.5% |
||
Peer group 1 valuation (p/share) |
162 |
159 |
116 |
152 |
130 |
122 |
||||
Peer group 2 valuation (p/share) |
173 |
168 |
226 |
146 |
154 |
145 |
||||
Source: LSEG, Edison Investment Research
Exhibit 3: Financial summary
£m |
2022 |
2023 |
2024e |
2025e |
2026e |
||
Year to 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
5,246 |
5,489 |
5,350 |
5,477 |
5,661 |
Cost of Sales |
(3,937) |
(4,611) |
(4,440) |
(4,491) |
(4,586) |
||
Gross Profit |
1,309 |
878 |
909 |
986 |
1,076 |
||
EBITDA |
|
|
594 |
618 |
631 |
686 |
738 |
Operating profit (before amort. and excepts.) |
|
333 |
355 |
356 |
406 |
458 |
|
Amortisation of acquired intangibles |
(198) |
(197) |
(197) |
(197) |
(197) |
||
Exceptionals |
(48) |
(578) |
(80) |
(40) |
(20) |
||
Associate adjustment |
(29) |
(30) |
(28) |
(28) |
(29) |
||
Reported operating profit |
58 |
(450) |
52 |
141 |
212 |
||
Net Interest |
(121) |
(91) |
(109) |
(109) |
(105) |
||
Finance exceptionals |
19 |
||||||
Profit Before Tax (norm) |
|
|
212 |
264 |
247 |
297 |
353 |
Profit Before Tax (reported) |
|
|
(63) |
(522) |
(57) |
32 |
107 |
Reported tax |
(14) |
27 |
7 |
(15) |
(34) |
||
Profit After Tax (norm) |
152 |
198 |
186 |
223 |
265 |
||
Profit After Tax (reported) |
(77) |
(495) |
(50) |
17 |
73 |
||
Minority interests |
(5) |
(6) |
(7) |
(8) |
(9) |
||
Net income (normalised) |
147 |
192 |
179 |
215 |
256 |
||
Net income (reported) |
(82) |
(501) |
(57) |
9 |
64 |
||
Average Number of Shares Outstanding (m) |
0 |
1,393 |
1,363 |
1,333 |
1,333 |
||
EPS - normalised (p) |
|
|
(15.3) |
13.8 |
13.1 |
16.1 |
19.2 |
EPS - normalised fully diluted (p) |
|
|
(15.3) |
13.8 |
13.1 |
16.1 |
19.2 |
EPS - basic reported (p) |
|
|
N/A |
(36.0) |
(4.2) |
0.7 |
4.8 |
Dividend (p) |
0.0 |
4.2 |
4.2 |
4.8 |
5.8 |
||
Revenue growth (%) |
0.0 |
6.3 |
(1.8) |
2.2 |
3.2 |
||
Gross Margin (%) |
25.0 |
16.0 |
17.0 |
18.0 |
19.0 |
||
EBITDA Margin (%) |
11.3 |
11.3 |
11.8 |
12.5 |
13.0 |
||
Normalised Operating Margin (%) |
6.3 |
6.5 |
6.7 |
7.4 |
8.1 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
5,483 |
4,717 |
4,552 |
4,422 |
4,302 |
Intangible Assets |
3,075 |
2,365 |
2,255 |
2,145 |
2,035 |
||
Tangible Assets |
1,813 |
1,751 |
1,696 |
1,676 |
1,666 |
||
Investments & other |
595 |
601 |
601 |
601 |
601 |
||
Current Assets |
|
|
1,450 |
1,517 |
1,496 |
1,521 |
1,557 |
Stocks |
498 |
510 |
501 |
512 |
528 |
||
Debtors |
638 |
628 |
617 |
630 |
650 |
||
Cash & cash equivalents |
270 |
313 |
313 |
313 |
313 |
||
Other |
44 |
66 |
66 |
66 |
66 |
||
Current Liabilities |
|
|
(1,472) |
(1,446) |
(1,554) |
(1,587) |
(1,638) |
Creditors |
(1,188) |
(1,179) |
(1,158) |
(1,183) |
(1,221) |
||
Tax and social security |
(109) |
(100) |
(100) |
(100) |
(100) |
||
Short term borrowings |
0 |
(2) |
(100) |
(100) |
(100) |
||
Other |
(175) |
(165) |
(197) |
(204) |
(217) |
||
Long-term liabilities |
|
|
(2,250) |
(2,222) |
(2,026) |
(1,906) |
(1,763) |
Long-term borrowings |
(1,104) |
(1,158) |
(1,065) |
(1,007) |
(906) |
||
Other long-term liabilities |
(1,146) |
(1,064) |
(962) |
(899) |
(857) |
||
Net Assets |
|
|
3,211 |
2,566 |
2,468 |
2,450 |
2,459 |
Minority interests |
39 |
36 |
33 |
33 |
33 |
||
Shareholders' equity |
|
|
3,172 |
2,530 |
2,435 |
2,417 |
2,426 |
CASH FLOW |
|||||||
Operating Cash Flow |
516 |
537 |
556 |
610 |
659 |
||
Working capital |
(32) |
18 |
10 |
(5) |
(8) |
||
Exceptional, pension & other |
(187) |
(168) |
(145) |
(85) |
(75) |
||
Tax |
(72) |
(61) |
(62) |
(74) |
(88) |
||
Net operating cash flow |
|
|
225 |
326 |
360 |
446 |
488 |
Capex |
(219) |
(262) |
(240) |
(282) |
(294) |
||
Acquisitions/disposals |
(3) |
0 |
0 |
0 |
0 |
||
Dividends received from JV |
59 |
63 |
58 |
59 |
61 |
||
Net interest |
(9) |
(63) |
(86) |
(86) |
(82) |
||
Free cash flow |
|
|
53 |
64 |
92 |
137 |
173 |
Equity financing/buy-back |
0 |
(7) |
(35) |
(15) |
0 |
||
Dividends paid |
0 |
(26) |
(62) |
(64) |
(73) |
||
Other |
(1,971) |
2 |
0 |
0 |
0 |
||
Net Cash Flow |
1,038 |
33 |
(5) |
58 |
100 |
||
Opening net debt/(cash) |
|
|
(1,918) |
880 |
847 |
852 |
794 |
Closing net debt/(cash) |
|
|
880 |
847 |
852 |
794 |
693 |
Source: Dowlais accounts, Edison Investment Research
|
|
Research: TMT
AUSTRIACARD has acquired a UK-based specialist in data analytics for €1.6m. This should bolster the group’s digital transformation technologies (DTT) practice and provide a route for LSTech to commercialise its technology. As LSTech is focused on similar verticals as AUSTRIACARD’s DTT business, the deal provides the potential for cross-selling as well as the enhancement of existing AUSTRIACARD solutions.