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Mixed bag led by weak S/A, muted order wins

Valuation and View – Order intake in Europe weakest of recent times

Endurance (ENDU) 1QFY25 consol results were weaker than estimates as margins in India business (adjusted for MH incentive) at 12% (+100bp/-60bp YoY/QoQ, est 13%) and Europe business at 16.5% (vs 17.8% QoQ). New order wins pace moderated in 1QFY25 especially for Europe with SA/EUR orders at ~Rs1.8.4b/EUR3.1m (vs ~Rs12b/EUR31m in FY24 and Rs9.35b/EUR83m in FY23). ENDU’s EV specific orders is muted with cumulative order of ~Rs8.42b (including BJAUT). The management reiterated key focus areas for the growth ahead would be, 1) to increase 4W share in consol business from 25% to 45% by FY30, 2) increase share of business in premium 2Ws for ABS, suspension and clutch assemblies, 3) deeper penetrate EV OEMs, 4) focus on non-Auto for large opportunities in Aluminium castings and 5) ~10% of India sales from aftermarket by FY28 (vs ~6% currently). We continue to believe ENDU should outperform the industry driven by, 1) new order wins and fast ramp up over FY25-27E for the proprietary products, 2) increasing share of higher margins business such as Disc brakes, ABS, Alloy wheels and structural castings. However, focus on Aluminium castings (for non-auto) may partially dilute margins. Our FY25/26 consol EPS largely unchanged as we factor in fast order rampup. However, valuations at 39x/30.9x FY25E/26E consol EPS do limit the upside, resulting in maintain the stock to ADD with revised TP of Rs2,814 (unchanged) as we value co at 35x to Mar’26 consol EPS (unchanged). We build in healthy revenue/EBITDA/Adj.PAT CAGR of 16%/23.4%/29% over FY24-26E.

Result highlights – Operationally weak

* Adj for MH state incentive in S/A, consol revenues grew 16% YoY (+6% QoQ) at Rs28b (est Rs27.9b). S/A revenues grew ~17% YoY (+3% QoQ) at Rs21b (est Rs21.8b). MH state incentives of Rs228m in 1QFY25. EU revenues grew 17.2/16.8% INR/EUR terms (v/s EU car registrations growth ay 4.6%). Maxwell revenues declined to Rs30m (v/s Rs160m YoY) led by decline in volumes from key customer ramp-up expected in Jul’24

* Consol gross margins came in line at 42% (+200bp YoY/flat QoQ, est 42.1%). Consol EBITDA grew 22.3% YoY (+0.6% QoQ) at Rs3.5b (est ~Rs3.8b) leading to margins expanding by 60bp YoY (-70bp QoQ) at 12.5% (est 13.5%).

* Segmental margins - S/A at 12% (+100bp YoY/-60bp QoQ, est 13%), EUR at 16.5% (+40bp YoY) led by decline in electricity/gas cost by 18%/16% YoY, Maxwell EBITDA loss at Rs42m (v/s loss of Rs28m). Weak operating performance restricted Adj.PAT growth to ~35% YoY (+4% QoQ) at Rs1.87b (est Rs1.95b).

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