The brokerage firm Motilal Oswal recommends 'buy' shares of Endurance Technologies for a target price of Rs 1,620. The company's Q4FY22 result was decent considering the muted domestic demand for 2Ws and high energy costs in the EU.
Target Price, CMP, Acquisition, Stock Overview
The Current Market Price (CMP) of the stock closed on 22 May 2022 is Rs 1,296. The brokerage has set a target price of Rs 1,620, considering the CMP and the target price, the stock has the potential to gain 25%.
|Target Price||Rs 1,620|
|52 Week Low||Rs 1,047.20|
|52 Week high||Rs 1,989|
"While Endurance Technologies has been winning new orders both in the domestic and export markets, its recent acquisition of Maxwell has opened up new opportunities in the electronic business (BMS, telematics, etc.) for EVs," Motilal Oswal Securities has said.
According to the brokerage, "Endurance Technologies Ltd' consolidated revenue declined 2.5% YoY to INR20.8b (est. of INR19.3b) in 4QFY22. EBITDA/Adj. PAT dipped 23%/27% YoY to INR2.6b/ INR1.4b (est. INR2.05b/INR0.8b), respectively in 4QFY22. For FY22, revenue grew 16% YoY but EBITDA/Adj. PAT fell 5%/4% YoY, respectively. "
"FCFF stood at INR2.2b (v/s INR3b in FY21) due to better CFO, which was at INR7.4b in FY22 (v/s INR6.2b in FY21). The Board declared a final dividend of Rs 6.25/share for FY22," the brokerage added.
Endurance Technologies Businesses - India & EU
According to the brokerage, Endurance Technologies' India business outperforms the domestic industry performance.
India business: Revenue dropped 3% YoY to INR15.5b (est. of INR15.1b); however, Endurance Technologies continued to outperform the underlying industry as 2W production declined ~21% YoY in 4QFY22 v/s a revenue decline of 3% YoY for ENDU. EBITDA margin contracted 210bp YoY to 12.7% (est. 11%). The beat was due to lower-than-estimated RM cost inflation. Adj. PAT dipped 17.5% YoY to INR1.15b (est. of ~INR0.9b). Revenue/EBITDA/Adj. PAT grew 20%/ 4%/7% YoY, respectively.
EU business: Revenue dipped 2% YoY to INR5.2b in 4QFY22 (est. of INR4.1b), adversely impacted by the semiconductor shortage and depreciation in the EUR:INR (revenue rose ~2% in EUR terms in 4QFY22). In EUR terms, revenue grew 5% YoY v/s a 4.9% YoY decline in PV registrations in the EU (including the UK) in FY22. EBITDA margin contracted 640bp YoY to 11.5% (est. of 9.6%) as higher-than-estimated RM cost was more than offset by operating leverage benefits. Adjusted PAT declined 55.5% YoY to INR215m (v/s our estimated loss of INR63m) in 4QFY22. For FY22, revenue grew 4% YoY but EBITDA/Adj. PAT declined 24%/38% YoY, respectively.
Buy for a target price of Rs 1,620
Endurance Technologies is the best proxy play for the Indian 2W industry, with scope to increase content, led by technological changes and new products. Coupled with its knowledge of aluminium die-casting in the EU, there is scope to increase contribution from the PV segment too. "We raise our FY23E/FY24E EPS by 13%/4% to factor in the growth in the EU business. The stock trades at 25.4x/21.4x FY23E/FY24E consolidated EPS. We maintain our BUY rating with a TP of Rs 1,620 (premised on 27x Jun'24E consolidated EPS)," the brokerage has said.
About The Company - Endurance Technologies
Founded in 1985, Endurance Technologies is India's leading auto component manufacturer. The company is engaged in the business of manufacturing and selling aluminium die casting (including alloy wheel), suspension, transmission and braking products with operations spread across India. It has 27 manufacturing facilities in 3 countries located near the OEMs of the company.
The stock has been picked from the brokerage report of Motilal Oswal securities. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.