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In line; Europe performance has been impressive

Healthy order wins to drive outperformance in core businesses

* Endurance Technologies (ENDU) reported an in-line performance, as EBITDA margin sustained a healthy 13%+ level in the last three quarters. Its healthy performance in Europe despite adversities is commendable.

* We are particularly optimistic about its shift toward the 4W segment, targeting 45% sales by FY30. A sustained recovery in underlying 2W demand, a strong focus on ramping up presence in the PV segment, and a strong order backlog in the EU in FY25 are the potential catalysts for the stock. We maintain our FY25E/FY26E EPS. Reiterate BUY with a TP of INR2,825 (premised on 34x Sep’26E EPS).

Total order wins in 1HFY25 stood at INR3.1b

* ENDU’s 2QFY25 consol. revenues grew 14% YoY to INR29.1b (in line). EBITDA rose 20% YoY to INR3.8b (in line) and adj. PAT was up 31% YoY at INR2b (in line).

* Its 1HFY25 revenue/EBITDA/adj. PAT grew 15%/18%/28% YoY. We expect the same to grow ~14%/20%/27% YoY in 2HFY25.

Indian business:

* Revenue grew 16.5% YoY to INR23b (in line) compared to the underlying 2W industry production growth of ~10% YoY. An incentive of INR131m was booked in 2Q.

* EBITDA margin stood at 13% (est. 13.4%), up 40bp YoY (+10bp QoQ).

* Adj. PAT rose 30% YoY to INR1.85b (in line).

* 1HFY25 revenue/EBITDA/adj. PAT grew 16%/20%/27% YoY.

EU business:

* In 2Q, the European business reported a total turnover of EUR66.9m (+6.4% YoY), EBITDA of EUR10.7m (+15.1% YoY), and a net profit of EUR2.9m (+13.7% YoY).

* European auto sales declined 6%, yet EDU outpaced the market with 6.4% growth, supported by new order wins and market share gains.

Maxwell business:

* Revenue grew 12% YoY to INR190m (est. INR80m) as its key customer has again started ramping up volumes from Jul’24.

* Operating loss stood at INR17m vs. INR43m loss in 2QFY24.

Others:

* Consolidated operating cash flow/FCF declined 3%/99% YoY. The sharp drop in FCF was mainly due to the higher capex, which grew 49% YoY to INR4.4b

Highlights from the management commentary

* Orders: In the last six months, the company secured INR3.1b in new non-Bajaj orders, with minimal replacements. Total new orders since FY20 reached INR29.3b, which will peak in FY27. Major orders include HMCL and TVSL brakes, Ather Energy’s battery parts, and aluminum castings for stationary engine application from Generac USA.

* Alloy wheel: The company had initially increased its alloy wheel capacity to 5.5m units pa from 4.5m units pa. However, given the huge demand for alloy wheels in India, it is in the process of setting up another greenfield for alloy wheels, with a capacity of 4.5m units pa and SOP anticipated in Sep’25. The current 2W alloy wheel market share stands at 13.3% and is projected to reach 25% once the new plant ramps up. This new capacity is expected to be margin accretive.

* Ramp-up in 4Ws: The management is highly focused on increasing its share of 4W business to 45% by FY30 from the current 25%. Given that OEMs such as Toyota, JSW, and Ather Energy are also investing in the AURIC Industrial zone, the company expects to see a quick ramp-up of its new plants.

* Europe: In 1HFY25, the company secured EUR23.6m in peak annual sales orders, including EUR10.5m from an e-axle manufacturer for BMW EVs, EUR7.6m from Volkswagen for specialty plastic components, and EUR1m from non-auto OEMs for finished aluminum castings.

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 presence in the PV segment, and a strong order backlog in the EU in FY25 are the potential catalysts for the stock

* The stock trades at 40x/32x FY25E/FY26E consolidated EPS. We reiterate our BUY rating with a TP of INR2,825 (based on 34x Sep’26E consolidated EPS).

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