Endurance Technologies
BSE SENSEX
30,579
S&P CNX
8,967
17 March 2020
Update | Sector: Automobiles
CMP: INR724
TP: INR1,025 (+42%)
Buy
All EU plants working, but utilizations down
India business as usual, but 1QFY21 to be slow on BS6 transition
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
We interacted with the senior management of Endurance Technologies (ENDU) to get an
ENDU IN
141
101.8 / 1.4
1237 / 701
-6/-6/-18
92
25.0
update on the company’s business/industry. ENDU’s management has stated that both
its businesses are so far operating without any material impact of disruption caused by
the Coronavirus (COVID-19). Key insights highlighted below:
Financials Snapshot (INR b)
Y/E March
2020E 2021E
Sales
70.6
75.0
EBITDA
11.5
12.0
Adj. PAT
5.8
6.0
Adj. EPS (INR)
41.0
42.4
EPS Gr. (%)
13.2
3.4
BV/Sh. (INR)
211.0 240.6
Ratios
RoE (%)
20.8
18.8
RoCE (%)
18.0
17.0
Payout (%)
28.4
30.1
Valuations
P/E (x)
17.9
17.4
P/BV (x)
3.5
3.1
Div. Yield (%)
1.4
1.4
FCF Yield (%)
4.6
4.4
2022E
82.6
13.2
6.6
46.6
10.0
273.2
18.1
17.0
30.1
15.8
2.7
1.6
4.8
Shareholding pattern (%)
As On
Dec-19 Sep-19 Dec-18
Promoter
75.0
75.0
82.5
DII
6.9
6.7
5.1
FII
16.8
17.0
10.0
Others
1.3
1.4
2.4
FII Includes depository receipts
Stock Performance (1-year)
Endurance Tech.
Sensex - Rebased
1,300
1,150
1,000
850
700
All of ENDU’s 9 plants (6 in Italy + 3 in Germany) in EU are operational.
ENDU’s plants in Italy are primarily located in the Turin region, while Lombardy
and Venice regions are facing shutdowns (quarantine). Even its collaborator,
Adler’s plant in Milan is operational.
EU operations are meeting 100% of its production schedules
and have not lost
any business, though operating rates have reduced.
Over the last 6-7 years, Italian plants have strategically shifted focus toward
German customers, which is now reflected in Volkswagon (VW) group being its
largest customer. German plants can partly make up for the short fall of Italian
plants if the situation worsens.
Production schedules in India are yet to see any material change.
However,
1QFY21 could see some changes as they transit to BS6 in this environment. 2W
OEMs in the near term are focused on liquidating BS4 inventory, particularly
the few larger players.
ENDU has benefitted from the supply disruption in China.
One of the OEMs
has brought forward the sourcing of brakes from ENDU due to the disruption.
Exports from India are so far normal.
ENDU exports machined castings to
Getrag in Mexico, the UK and France.
For its India operations, ENDU sources certain components from China.
However, it also has an alternate source for these components in India as well,
thereby ensuring continuity of operations.
Valuation and view:
We are lowering our consol EPS FY20/21 estimates to by
1%/8% to factor in for impact of coronavirus in EU business and our lowered
estimate for 2W industry volume growth. ENDU’s near-term operating
performance is expected to be influenced by the longevity of disruption in
Europe and the BS6 transition in India. Both these events are transitory in
nature but have created meaningful dislocation in price. Our positive view on
ENDU remains intact and is driven by the company’s strong positioning in 2W
OEMs as well as visibility of increase in content. Post the recent correction in
the stock price, valuations are reasonable at 17.4x/15.8x FY21/FY22E consol.
EPS. We also lower target multiple 22X (from 25x earlier) to factor in for risk of
prolonged impact of coronavirus. Maintain
Buy
with TP of INR1,025 (~22x
Mar’22E consol. EPS).
Research Analyst – Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Vipul Agrawal
(Vipul.Agrawal@MotilalOswal.com) +91 22 7193 4322
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Endurance Technologies
Stories in chart
Exhibit 1: Trend in consolidated sales
Sales (INR m)
16.7
10.2
6.4
6.8
13.7
8.5
Sales Growth (%)
18.2
10.0
22.9
21.3
Exhibit 2: Trend in consolidated PAT
PAT (INR m)
23.8
18.6
10.3
13.2
9.6
9.4
PAT Growth (%)
24.5
-6.0
Exhibit 3: Geography-wise sales break-up FY19 (%)
Other, 1.9
Europe,
28.3
Exhibit 4: Market share in India business (%)
35.0
25.0
15.0
5.0
FY15
FY20E
India, 69.8
Aluminium
casting and
alloy wheels
Braking
Systems
Shock
Transmission
Absorbers &
Front forks
Exhibit 5: Customer-wise break-up (%)
Bajaj Auto
Fiat Group
Royal Enfield
HMSI
Others
Exhibit 6: Segment-wise break-up (%, consolidated)
Aluminium Casting
Braking Systems
Suspension
Aftermarket
Transmission
34
9
8
14
35
FY18
32
9
7
13
39
FY19E
3.8
3.7
3.9
4.4
3.5
3.6
4.4
4.4
4.8 5.5 4.7 5.7 4.9
4.7
5.7
5.8 5.76.0 6.5
5.2
6.5
6.5
6.1
6.0
22.8
23.4
24.8
27.1
27.1
27.5
29.6
32.2
63.7
63.0
61.0
57.7
56.8
56.1
54.3
50.9
17 March 2020
2
 Motilal Oswal Financial Services
Endurance Technologies
Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Employees Cost
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
49,170
16.7
29,712
4,206
9,204
43,121
87.7
6,048
12.3
2,269
3,779
510
325
3,594
0
3,594
1,055
29.3
16
2,524
2,524
21.3
5.1
FY16
52,304
6.4
31,141
4,823
9,544
45,509
87.0
6,795
13.0
2,432
4,363
490
330
4,203
0
4,203
1,199
28.5
11
2,994
2,994
18.6
5.7
FY17
55,880
6.8
32,259
5,455
10,611
48,325
86.5
7,555
13.5
2,905
4,650
322
319
4,646
0
4,646
1,343
28.9
0
3,303
3,303
10.3
5.9
FY18
63,514
13.7
36,609
5,809
11,817
54,235
85.4
9,279
14.6
3,216
6,063
235
235
6,062
-269
5,793
1,886
32.6
0
3,908
4,089
23.8
6.4
FY19
75,105
-6.0
38,338
6,872
13,962
59,171
83.8
11,459
16.2
3,924
7,536
191
429
7,773
472
8,245
2,135
25.9
0
6,110
5,760
13.2
8.2
FY20E
70,631
6.1
41,241
7,345
14,370
62,957
84.0
12,002
16.0
4,413
7,589
175
631
8,044
0
8,044
2,086
25.9
0
5,959
5,959
3.4
7.9
(INR Million)
FY21E
74,959
10.2
45,798
7,865
15,689
69,353
84.0
13,246
16.0
4,975
8,271
144
712
8,838
0
8,838
2,283
25.8
0
6,555
6,555
10.0
7.9
FY22E
82,598
10.0
47,235
7,865
16,235
71,335
83.6
13,994
16.4
4,975
9,018
144
712
9,586
0
9,586
2,490
26.0
0
7,096
7,096
9.2
8.3
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Preference Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY15
176
0
11,397
11,573
107
7,731
-207
19,204
29,895
16,476
13,419
1,316
216
10
14,345
3,858
5,787
936
3,763
10,103
6,709
2,986
408
4,242
19,204
FY16
176
0
14,322
14,498
0
8,262
-185
22,576
35,138
19,136
16,002
1,469
1,034
482
15,238
4,099
5,928
1,674
3,537
11,650
7,385
3,800
464
3,588
22,576
FY17
1,407
0
15,887
17,293
0
6,794
-182
23,905
20,052
5,070
14,982
1,355
438
327
17,807
4,438
7,609
2,199
3,561
11,004
8,642
1,831
531
6,803
23,905
FY18
1,407
0
20,322
21,729
0
5,586
17
27,332
25,218
8,286
16,932
1,577
592
459
23,852
4,939
9,688
5,027
4,198
16,081
11,284
4,409
388
7,771
27,332
FY19
1,407
0
24,240
25,647
0
5,584
161
31,392
32,159
12,048
20,112
1,520
1,178
361
24,690
5,400
9,251
5,379
4,660
16,468
11,735
3,783
950
8,222
31,392
FY20E
1,407
0
28,267
29,674
0
4,584
161
34,419
36,909
15,971
20,938
1,520
1,178
361
25,910
5,078
8,700
7,749
4,382
15,487
11,036
3,558
894
10,423
34,419
(INR Million)
FY21E
1,407
0
32,433
33,840
0
3,584
161
37,585
42,159
20,384
21,775
1,520
1,178
361
29,188
5,390
9,233
9,914
4,651
16,436
11,712
3,776
948
12,752
37,585
FY22E
1,407
0
37,016
38,422
0
2,584
161
41,168
47,909
25,359
22,550
1,520
1,178
361
33,671
5,939
10,174
12,433
5,125
18,111
12,905
4,161
1,045
15,559
41,168
17 March 2020
3
 Motilal Oswal Financial Services
Endurance Technologies
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Net Debt/Equity
FY15
17.9
34.1
82.3
0.9
5.9
41.0
8.9
2.2
18.2
0.1
8.0
23.6
16.0
15.9
1.6
2.6
29
43
50
0.6
FY16
21.3
38.6
103.1
1.3
7.1
34.5
7.1
2.1
16.2
0.2
15.7
23.0
15.9
16.7
1.5
2.3
29
41
52
0.4
FY17
23.5
44.1
122.9
2.5
12.8
31.3
6.0
1.9
14.3
0.3
11.1
20.8
15.1
16.4
2.8
2.3
29
50
56
0.2
FY18
29.1
51.9
154.5
4.0
17.3
25.3
4.8
1.6
11.2
0.5
22.4
21.0
16.5
19.4
2.5
2.3
28
56
65
0.0
FY19
36.2
62.9
182.3
5.5
18.8
20.3
4.0
1.4
9.2
0.7
15.7
21.5
18.0
22.2
2.3
2.4
26
45
57
0.0
FY20E
41.0
68.8
211.0
10.2
28.4
17.9
3.5
1.4
8.7
1.4
33.7
20.8
18.0
22.5
1.9
2.1
26
45
57
-0.1
(INR Million)
FY21E
42.4
73.7
240.6
10.6
30.1
17.4
3.1
1.3
8.1
1.4
32.0
18.8
17.0
21.9
1.8
2.0
26
45
57
-0.2
FY22E
46.6
82.0
273.2
11.6
30.1
15.8
2.7
1.1
7.1
1.6
35.0
18.1
17.0
23.0
1.7
2.0
26
45
57
-0.3
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY15
3,594
2,269
510
-1,088
-847
4,438
-305
4,133
-3,001
1,132
0
-3,106
-17
-817
-524
-64
-1,285
-258
1,195
937
FY16
4,203
2,432
490
-1,050
301
6,376
520
6,896
-4,686
2,209
-456
-5,433
0
14
-486
-296
-725
737
937
1,674
FY17
4,646
2,905
289
-1,337
-563
5,941
-570
5,371
-3,804
1,567
190
-3,607
0
-861
-299
-63
-1,224
540
1,656
2,196
FY18
5,793
3,216
215
-2,095
-18
7,111
310
7,421
-4,264
3,157
-104
-4,355
0
396
-208
-423
-236
2,830
2,196
5,026
FY19
7,331
3,762
233
-2,337
305
9,294
-310
8,983
-6,776
2,207
137
-7,252
0
-762
-233
-678
-1,673
59
5,026
5,084
FY20E
7,773
3,924
-98
-2,135
169
9,494
0
9,494
-4,750
4,744
0
-4,321
0
-1,000
-191
-1,733
-2,925
2,248
5,377
7,625
(INR Million)
FY21E
8,044
4,413
-237
-2,086
-164
9,752
0
9,752
-5,250
4,502
0
-4,620
0
-1,000
-175
-1,793
-2,968
2,165
7,625
9,790
FY22E
8,838
4,975
-455
-2,283
-289
10,673
0
10,673
-5,750
4,923
0
-5,039
0
-1,000
-144
-1,972
-3,116
2,518
9,790
12,309
17 March 2020
4
 Motilal Oswal Financial Services
Endurance Technologies
NOTES
17 March 2020
5
 Motilal Oswal Financial Services
Endurance Technologies
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In
case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days,the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent
with the investment rating legend.
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Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s)
who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S:
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOFSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts,
any brokerage and investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-
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which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as
amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule
2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in
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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form,
without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this
report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all
investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient
of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors
to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest
Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right
to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal
as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these
entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or
developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced,
redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein
may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees,
agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information
specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold
MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate
Agent: CA0579; PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products
and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of
MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is
subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench.
Disclosure of Interest Statement
Analyst ownership of the stock
Endurance Technologies
No
17 March 2020
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