Endurance Technologies Results Report - Market share gains in brakes to drive outperformance - HDFC Securities

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

Endurance continues to grow ahead of the industry, with 4QFY21 sales expanding ~5% QoQ despite a weak quarter for the 2W industry. The management is confident of expanding its market share in the brakes segment (which forms ~10% of revenue), from 30% currently to ~50% after the new capacities come on stream. Further, the parts maker expects to gain market share in the 200cc premium segment as it wins orders to supply high-end ABS systems, a segment that is currently dominated by MNCs such as Bosch. We reiterate our BUY rating with a target price of INR 1,600 at 30x FY23E EPS (we have tweaked our estimates upwards by 3%).

4QFY21 financials: Standalone: Revenue at INR 15.98bn grew ahead of our estimates at +5% QoQ. EBITDA margin at 14.8% contracted 220bps QoQ due to higher RM costs (64.4% of sales vs 62.1%) and lower government incentives. APAT came in at INR 1.39bn (-14% QoQ). Consolidated: Consolidated revenue at INR 21.3bn was up 5% QoQ while EBITDA margin at 15.6% contracted 170bps QoQ. APAT at INR 1.87bn declined 7% QoQ. Europe operations: Revenue came in at INR 5.3bn (+4% QoQ) while margin at 17.9% was nearly flat QoQ. It contributed 27.3% to consolidated revenue in FY21.

Con call and other highlights: (1) Capacity expansion: The Vallum plant has commenced operations, and is supplying to Hyundai/Kia and Enfield. Endurance would increase the disc brake assembly capacity from the existing 285k/month to 570k/month and discs capacity from 375k/month to 675k/month by Aug-21. Also, it is setting up an aluminium low pressured die casting plant at Pantnagar for 720k/p.a., which would commence operations in 2QFY22. The supply of 2W ABS brake assemblies should start by Oct-21. (2) Strong order book: The RFQs stood at ~INR 15bn at the end of FY21. (3) Focus on EVs: Endurance has already started supply for brake assemblies, suspensions and aluminium casting for 2W and 3W EVs. (4) Aftermarket segment contributed 6.5% to sales in FY21. The company targets reaching 10% of sales by entering more exports (currently 29 countries). The company started retailing tyres in the 2/3W segment as part of a trading arrangement.

Shares of Endurance Technologies Ltd was last trading in BSE at Rs.1396.7 as compared to the previous close of Rs. 1399.75. The total number of shares traded during the day was 12983 in over 1575 trades.

The stock hit an intraday high of Rs. 1430 and intraday low of 1384.8. The net turnover during the day was Rs. 18168230.

Source : Equity Bulls

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