Sharecast - The bank noted that consensus expects electrification to be neutral/positive for Dowlais, but said that its deep dive suggests battery electric vehicles (BEVs) could be a risk in the mid-term, with around 45-50% of sales seeing margin pressure.
"In this relatively technical and under-researched space, our due-diligence includes in-depth proprietary work on the EV powertrain sub-sector and feedback from those involved in EV design and/or purchasing at car-makers," it said.
"In a nutshell, many of the components Dowlais competes in are at risk of commoditisation and/or content-loss and/or over-capacity in the BEV world amid current or upcoming tech-disruptions."
Citi (NYSE:C) also said that relatively high net debt and near zero FY23 free cash flow add to concerns, should the cycle turn.
It pointed out that the shares are trading at a premium of around 20% to peers. The bank said it’s 5% to 10% below consensus 2024/25 and has opened a "negative catalyst watch" on the stock into results.
At 1010 BST, the shares were down 7% at 116.20p.