Dowlais Group PLC (LSE:DWL) has received a bullish write-up from analysts at Bank of America who see an unappreciated margin growth story.
Essentially GKN’s non-aerospace business, Dowlais was spun out of the Melrose group.
BofA says it has a market-leading position in core components such as side shafts and torque management, a strong reputation with OEMs, particularly in high-performance and niche areas, and is working through numerous self-help initiatives.
BofA believes too much emphasis is being placed by investors on combustion engine exposure, ignoring the possibility of margins rising by 3% over the next four years,
US motor maker strikes have also upset the mood but beyond that a lot of electric vehicles use Dowlais parts and there is an opportunity here, especially for magnets using its power metallurgy skillset.
Dowlais should trade at a premium, argues the bank, hence its 144p share target and 'buy' rating.