Target: ₹1,696

CMP: ₹1,466

Endurance Technologies’ strong business growth momentum continues. Despite industry volumes declining, demand was strong across product categories. Semiconductor challenges are a near- to medium-term headwind. In the quarter, the company continued to win significant orders, started supplies to major OEMs, incl. electric, and added a new high-margin product for three- and four-wheeler applications. This augurs well for long-term growth. Accordingly, we upgrade our rating to a Buy, with a higher target price of ₹1,696 (28x FY24).

In 9M-FY22, the company won automotive orders of ₹585 crore from top domestic OEMs (TVS, HMSI, Hero, Royal Enfield, Ather Energy) and received RFQs of ₹1,890 crore. Of the new orders, about ₹130 crore from electric OEMs like Ather were for brakes (₹53 crore) and Polarity smart bikes (₹70 crore). Non-auto orders were for castings (₹100 crore), for gensets and 5G telecom applications.

High RM prices squeezed Q3 margins 302 bps q-o-q to 10.8 per cent. We expect margins to expand on expected volume growth (domestic, international) and the greater proportion of high-margin and value-added products. Hence, we expect margins of 15.8 per cent in FY23 and 16.3 per cent in FY24.

We expect 15 per cent revenue CAGR over FY21-24, and 17 per cent earnings growth, leading to ₹61 EPS.

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