ICICI Direct's research report on Endurance Technologies
Endurance Technologies (ETL) is the largest aluminium die casting company in India by installed capacity and also a leading (top-two) player by market share in other served products i.e. suspension, braking and transmission. As of FY20, aluminium die casting (ADC; includes 2-W alloy wheels) contributed to ~53% of consolidated sales with suspension, braking, transmission, aftermarket forming ~29%, ~8%, 6%, ~4%, respectively. Total ~71% of revenues came from India, with Europe comprising ~29%. In terms of segments, 2-W formed ~56% of sales while 3-W, 4-W formed ~12%, ~32%, respectively. ETL caters to major OEMs like Bajaj Auto, Honda Motorcycles & Scooters, Royal Enfield in India & Volkswagen, FCA, Daimler in Europe.
Outlook
We believe ETL deserves to command a significant valuation premium relative to much of the India auto ancillary universe on account of its strong future growth prospects, diversified product and client base along with superior financials (net debt-free B/S, RoIC at ~25%). We assign a BUY recommendation to the stock, valuing it at Rs 1,575 i.e. 30x P/E on FY23E EPS.
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