Buy Endurance Technologies Ltd For Target Rs.2,400 by Motilal Oswal Financial Services Ltd
Healthy performance despite tough macro
Healthy order wins to continue to drive outperformance
* Endurance Technologies (ENDU) delivered an in-line operational performance in 3QFY25, with better results from EU operations offsetting weaker-than-anticipated India performance. However, its strong order book and continued expansion across product categories, both organically and inorganically, position ENDU well for stable growth in both regions.
* We remain optimistic about ENDU’s strategic push into the 4W segment, targeting 45% of sales by FY30. A steady recovery in 2W demand, an expanding presence in PVs, and a robust EU order backlog serve as key growth drivers. We cut our FY25E/FY26E EPS by 3%/6% to reflect lower other income. Reiterate BUY with a TP of INR2,400 (30x Dec’26E EPS). Endurance is our top pick in the auto ancillary space.
Commendable operating performance despite tough macro
* 3QFY25 consolidated revenue/EBITDA/PAT grew ~12%/25%/21% YoY to INR28.6b/INR3.7b/INR1.8b (est. INR29.3b/INR3.9b/INR2.1b). 9MFY25 revenue/EBITDA/PAT grew 14%/20%/26% YoY.
* Growth was driven by ~9% YoY growth in standalone (India) business (vs. 2W industry sales growth of 7%) and ~20% YoY growth in subsidiaries.
* Europe business revenue grew ~22% YoY in INR terms and ~21% in EUR terms (vs. new car registration growth of 1.3%) on the back of its strong order wins. Maxwell reported revenue growth of 37% YoY to INR260m in 3QFY25. Aftermarket sales in India stood at INR3.5m vs. INR3.3m YoY.
* Gross margin expanded 300bp YoY/70bp QoQ to 42.9% (est. 42.4%). EBITDA grew ~25% YoY to INR3.7b (est. INR3.9b), while EBITDA margin expanded 130bp YoY (-10bp QoQ) to 13% (est. 13.3%).
* Standalone EBITDA expanded 90bp YoY to 12.5% (est. 13%). EBITDA margin for EU business improved 70bp YoY to 16.2%. The same for Maxwell business improved ~110bp YoY to 13.7% in 3QFY25.
* While operating performance was in line, lower other income and higher tax led to a PAT miss at INR1.8b (+21% YoY, est. INR2.1b).
India
* Cumulative order book stood at INR42.73b, with order wins of INR7.8b in 9MFY25. EV order value as of 9MFY25 stood at INR3.9b, translating into 49% of total order value in 9MFY25 (vs. 8% in FY24). It has cumulative orders of INR9.6b in India EV space, including orders from Bajaj Auto.
Europe
* Cumulative orders in EU stood at EUR244m, with order wins of EUR36m in 9MFY25. It has large orders in the hybrid segment from VW and BMW.
* Out of EUR244mn of cumulative orders won in the last five years, orders worth EUR94m (39%) are for EV applications and EUR109m (45%) for Hybrid Applications. ICE end-use, currently at ~50% of ENDU’s Europe revenue, is expected to reduce to 25% in FY28.
Highlights from the management commentary
* New Orders: ENDU secured new orders worth INR7.8b, with 50% for EVs and 40% for 4Ws. Key OEMs include HMCL, HMSI, Kawasaki, and TVS. Al die castings orders stood at INR3.8b in FY25, brake orders stood at INR1.71b, transmission at INR524m, and drive shafts at INR450m, mainly from Mahindra.
* Expansion plans: The Auric Shendra 4W casting plant infrastructure will be ready by Feb’25, with SOP planned for Jun’25. The plant has secured a machine casting order from Valeo, with peak annual sales of INR730m, and an INR1.5b export order from a premium global OEM. The AURIC Bidkin 2W alloy wheel plant is on schedule, and will help ENDU expand its OEM customer base.
* Tie-ups to enhance presence in 4Ws: ENDU is entering the 4W suspension segment via a tech tie-up with a leading Korean firm, initially as a second source but aiming for the primary supplier status in new platforms. Strong OEM interest is driving ongoing discussions, with a planned greenfield facility. In 4Ws, ENDU also plans to enter the braking business through a technology tie-up with BWI and targets commercialization from 4QFY25.
* Stoferle acquisition in Germany enhances its presence among German OEMs in transmission components, with its in-house machine building capabilities and automation expertise. After this acquisition, ENDU will be the sole supplier for 80% of products. This company also has sound financials: EUR80m in revenue with 18-20% EBITDA margin, and it is a net cash company.
Valuation and view
* ENDU is now focusing on increasing the 4W revenue contribution to 45% by FY30 from 25%, and this will remain a key growth driver in the coming years. A sustained recovery in underlying 2W demand, a strong focus on ramping up its presence in the PV segment, and a strong order backlog in EU in FY25 are the potential catalysts for the stock.
* The stock trades at 27x FY26E/23x FY27E consolidated EPS and does not reflect its strong order book across businesses, consistent outperformance and superior financials. We reiterate our BUY rating with a TP of INR2,400 (based on 30x Dec’26E consolidated EPS). ENDU is our top pick in the auto ancillary space.
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