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Operating performance in line

Targets PV contribution at 45% by FY30

* Endurance Technologies (ENDU) reported an in-line operating performance in 1QFY25 with the India business underperforming the overall 2W industry growth mainly due to the uneven growth of its key customers. The EU outperformance was led by the tooling sales for new orders booked and sales of machined components. ENDU continues to focus on acquiring new businesses and targets 45% revenue from PVs by FY30 (vs. 25% at present).

* We reduce our FY25E/FY26E EPS by 5% each owing to weakness in the EU demand environment. Reiterate BUY with a TP of INR2,945 (premised on 34x Jun’26E EPS).

EU outperformance partly due to tooling sales for new orders

* ENDU’s 1QFY25 consol. revenues grew 15% YoY to INR28.25b (in line). EBITDA rose 16% YoY to INR3.7b (in line), and adj. PAT was up 25% YoY at INR2b (in line).

India business:

* Revenue grew 16% YoY to INR21.2b (est. INR21.9b) compared with underlying 2W industry production growth of ~20% YoY.

*  Underperformance vs. the industry was driven by uneven growth (-0.4% to 51%) for key customers.

* EBITDA margins at 12.9% (est. 12.8%) grew 30bp YoY (-60bp QoQ). ? Adj. PAT rose 25% YoY to INR1.6b (est. ~INR1.7b).

The EU business:

* The EU revenue rose 17% YoY to EUR80m (est. EUR70m) vs. 5% YoY growth in the EU new car registrations. Growth was partly due to tooling sales for new orders booked and sales of machined components.

* EBITDA margin at 16.5% (est. 16.3%) improved 40bp YoY (-130bp QoQ) during the quarter.

* Adj. PAT grew 17% YoY to EUR4.9m (est. EUR4m).

Maxwell business:

* Revenue declined 81% YoY to INR30m (est. INR200m) with slower volumes from a key customer.

* Operating loss stood at INR42m, up from INR28m loss in 1QFY24.

* ENDU further raised its stake in Maxwell by 5.5% to 61.5%.

Highlights from the management commentary

* Business wins: INR1.84b worth of businesses won in 1QFY25 from OEMs other than BJAUT, of which INR1.1b was the EV business.

* PV business declined in FY24 and in 1QFY25 mainly due to the dip in sales for Ford Getrag because of weak global PV sales. This weakness is likely to continue in the near term. However, it is focused to take the PV contribution to 45% in FY30 from 25%.

* EUR3.1m of businesses won in 1QFY25, which included wins from VW for specialty plastic components for hybrid PVs. This business currently contributes ~5% of overall ENDU’S EU revenue. Presently, it is a small business (EUR2m), but an entry with VW will help ramp up presence in this segment going forward.

Valuation and view

* ENDU is the best proxy play for the Indian 2W industry. It has scope to increase content, led by technological changes and new products. ENDU is now focusing on increasing the 4W revenue contribution to 45% of revenue by FY30 from 25%, and this would remain a key growth driver in the coming years.

* The stock trades at 40x/31x FY25E/FY26E consolidated EPS. We reiterate our BUY rating with a TP of INR2,945 (based on 34x Jun’26E consolidated EPS)

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