Checkout Budget Highlights 2023Prabhudas Lilladher's research report on Endurance Technologies
We trim our EPS estimate by 9% for FY24 and cut our EBITDA margin by 140bps, citing recovery to be gradual. Endurance Technologies (ENDU) 3QFY23 consolidated EBITDA margin came in aat 11.4% (flat QoQ) vs our estimates of 12%, impacted by weak performance at India operation (revenue -16% QoQ; 2W industry production -18.5% q-q). However, Europe grew 9% QoQ driven by industry growth, government incentives on high energy prices and cost pass-ons. Going ahead, we expect domestic 2W demand to recover, however, situation remains weak in Europe given inflation and high interest rates. Furthermore, ENDU will start production with new capacities (+200k p.a.) for Dual-channel ABS (400k currently) by second half of 1QFY24 (further ramp-up to 1.2mn p.a. by 2HCY24).
Outlook
We believe ENDU will continue to outperform the industry volume growth given (1) expectations of 2W demand improvement, (2) addition of new and value added products (ABS supply ramp-up over FY24-25, driveshafts, non-automotive castings etc.), (3) ramp-up in EV offering which will contribute to revenue and (4) increasing share of after-markets and exports. Maintain ‘BUY’ with revised TP of Rs 1,640 (Rs 1,600 earlier 26x Sep-24E) at 26x Dec-24E EPS.
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