Prabhudas Lilladher's research report on Endurance Technologies
Endurance’s 2QFY23 consolidated EBITDA margin came in at 11.5% (+20bps QoQ) vs our estimates of 12.2%, impacted by energy cost pressures in EU operations (subsidiaries EBITDA margin contracted 450bps QoQ). Management expects cost pressures to ease from 3Q with government measures and cost pass-ons. India business performance, on the other hand, was highly encouraging (EBITDA margin expansion of 140bps QoQ) led by healthy demand scenario. Simultaneously, driveshaft supplies started for Bajaj Auto along with orders from M&M and TVS. The company also plans to ramp-up ABS production to 1.2mn by 2H-2024 from 400k currently. We believe Endurance will continue to outperform the industry given (1) expectations of 2W demand improvement over FY23 (after two weak years), (2) addition of new and value added products (ABS supply ramp-up over FY23, driveshafts, non-automotive castings etc.), (3) ramp-up in EV products and (5) increasing share of after-markets and exports.
Maintain ‘BUY’ with revised TP of Rs 1,600 at 26x Sep-24E EPS (27x earlier; to factor in near-term distress in the EU business).
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