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Robust order book, customers acquired; maintaining a Buy For Target Rs.1,868 

In Q2, Endurance Technologies continued to build on its strong or der book. It added high-volume customers in EVs while commencing sales of a new highmargin product in transmission. The recent Maxwell acquisition continues to grow the share of business with new order wins. Overall, two-wheeler growth is expected to be strong, continuing from the good festival period. This augurs well for long-term growth; hence, we retain a Buy at a revised TP of Rs 1,868 (25x FY25e).

Strong revenue performance on peaking orders. Q2 revenue grew 25% y/y, 12% q/q, to Rs23.6bn on strong demand on order-book execution. In Q2, the company won orders of Rs6.9bn (Rs4.8bn the prior quarter) and had RfQs of Rs22.8bn. Production for most would commence in coming quarters and volumes are expected to peak in the next one year. The overall EV OB is Rs3.4bn (Rs1.2bn for Bajaj, Rs1.2bn Hero Motorcorp and other OEMS like Ather, Hero Electric, Mahindra Electric and Bounce Infinity). It will supply braking, castings and BMS systems, and revenues are expected from next year. In transmissions, it commenced supplies of driveshafts and subsequently won orders, thus offering tremendous growth opportunities in the next few years. Hence, we expect strong, 23%, growth in FY23 and 18% in FY24.

Europe: Q2 FY23 revenue was €57m (€61.1m the prior quarter); EBITDA was €6m (€5.2m), with weak, ~11%, margins due to high energy costs. It won orders of €42m from Porsche, Daimler and Stellantis.

Margin betterment. The Q2 margin expanded 20bps q/q to 11.5%, as prices of aluminium and steel cooled. With a 90% pass-through to customers, we expect operating leverage-led margin expansion coupled with a better product mix. For Europe, energy and gas prices stood at €450 per mw and €208 for gas, which is expected to come down to €340/€150 in subsequent months. Hence, we expect margins of 12.7% in FY23 and 13.8% in FY24.

Introducing FY25e. We expect FY25 revenues to grow 19% y/y, margins to expand to 14.5% and earnings to grow 34% y/y to Rs10.5bn

Valuation. We expect a 20% revenue CAGR over FY22-25 and 32% earnings growth, leading to an Rs74.4 EPS. We retain a Buy at a revised TP of Rs1,868 (25x FY25e).

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