Choice Broking has come out with its report on Varroc Engineering. The research firm has recommended to "Subscribe " the IPO in its research report as on June 23, 2018.
Varroc is the sixth largest manufacturer in the global exterior automotive lighting space with a market share of around 4%. Also it is among the top three independent exterior lighting players in the globe. Being an independent player, the company has the benefit to target any market with its own product technology. Moreover, in the global premium vehicle market, Varroc has a market share of 6%. In the electric vehicle market, the company has a market share of 20% and is one percent point lower than the market leader.
Its global clientele includes marquee auto manufacturers across the premium, mid-range and mass market pricing spectrum and includes Ford, Jaguar Land Rover, the Volkswagen Group, Renault-NissanMitsubishi, Groupe PSA, FCA etc. Its domestic customers include Bajaj Auto, Royal Enfield, Yamaha, Suzuki, Honda, Hero, Piaggio etc. Varroc has strong long standing relationship with many of its customers and this can be demonstrated by the fact that since 1990 not a single customer has left the company.
Valuation and OutlookAt the higher price band of Rs. 967 per share, Varroc’s share is valued at a P/E multiple of 29x (to its restated FY18 EPS of Rs. 33.4) as compared to the peers average of 23.1x.
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