BUY on Endurance Technologies - Encouraging outlook; new products to drive sales - HDFC Securities

Mr. Harshad Katkar & Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities

Endurance continues to expand into new segments as the company will commence ABS orders in 1QFY22 and its CBS facility will be commissioned shortly. It is winning orders from new customers (TVS) and is expanding with HMSI, Hero, etc. We reiterate BUY. We have a target price of Rs 1,270 at 28x Sep-22E EPS (our estimates are changed marginally by 1% over FY22/23E). Key risks: slower-than-expected industry recovery.

2QFY21 financials: Standalone: Revenue at Rs 12.8bn, flat YoY, was above our estimates. EBITDA margin surprised at 18% and expanded 280bps YoY, owing to improved operating leverage. PAT came in at Rs 1.3bn (-1.6% YoY). Consolidated: Consolidated revenue at Rs 17.7bn was flat YoY. EBITDA margin at 17.7% expanded 125bps YoY. PAT at Rs 1.67bn declined 1.1% YoY. Europe operations: Revenue came in at Rs 4.8bn (flat YoY). Margin at 16.8% was up 50bps QoQ but lower 290bps YoY due to a change in product mix and higher raw material costs. It contributed 27% to consolidated revenues.

Concall and other highlights: (1) Encouraging order book: RFQs stood at Rs 12.3bn at the end of 2Q. The management expects growth momentum to sustain in the near term as OEM orders are encouraging and the company is gaining new business. In 1HFY21, it received Rs 3.6bn of new order wins from HMSI, Hero, Yamaha, Suzuki, and TVS. Its new client, TVS, has awarded Rs 1.96bn worth of brake and suspension business for 2Ws/3Ws. Vallum plant will commence shortly and supply to Hyundai/Kia and Enfield. (2) Expansion in various segments: Endurance is setting up a capacity of 600k p.a. of CBS brakes in Pantnagar, Uttarakhand, which is expected to start operations shortly. Endurance is in advance stages of clearance for its ABS brake assemblies and has already been allotted business which should start in 1QFY22. (3) Market share gains: In 2Q, revenues from Yamaha/HMSI/ Suzuki/Tata grew by ~14/19/29/39% YoY. Management expects HMSI/ Yamaha/Hero's revenues to grow 1.2-1.5x by FY22 from FY20 base, as the company gains a further foothold with these companies. Share of business from Bajaj decreased by 3% due to ramp-up from other OEMs.

Shares of Endurance Technologies Ltd was last trading in BSE at Rs.1033.2 as compared to the previous close of Rs. 1047.35. The total number of shares traded during the day was 2593 in over 336 trades.

The stock hit an intraday high of Rs. 1047.5 and intraday low of 1024.2. The net turnover during the day was Rs. 2673708.

Source : Equity Bulls

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