Endurance Technologies Ltd. share price target

Concern on Margin sustainability persists - Maintain SELL: During Q2FY19, ETL's consolidated sales increased by 23.2% YoY to Rs19.4bn. Its EBITDA margins however declined by 15bps YoY to 14.4%. ETL's PAT increased by 25.6% YoY to Rs 1.3bn.

grew 23% YoY to INR19.4b (above est. EBITDA grew ~22% YoY, with margin contracting 20bp YoY and QoQ to 14.4% (v/s est. 14.8%) as lower staff cost and other expenses failed to fully off-set impact of higher RM costs. Adj. PAT was in line at INR1.25b, growing 26% YoY (flat QoQ). 5 November 2018 S/A revenue grew ~26% YoY to ~INR14.4b (above est. of INR13.5b), growing faster than the underlying industry.

Endurance (ETL) had a strong Q3, as anticipated. India revenue grew 25% YoY, as it continues to outperform production growth of India 2W industry (+16% YoY). With volume recovery of Bajaj Auto (~50% of ETL India revenue; +22% YoY in Q3)

Consol. revenue grew 19.8% YoY to INR15.8b (est. of INR16b). EBITDA of INR2.2b was in line with our estimate of INR2.3b. Below-estimated RM cost (led by favorable mix, and pass-through of commodity inflation with a lag) was offset by higher other expenses. EBITDA margin stood at 14.1% v/s our estimate of 14.2%. There was an exceptional expense of INR269m toward Voluntary Separation Scheme as part of its plant consolidation activity in India. Adj. PAT grew 29% YoY to INR957m (est. of INR995m)

Endurance Technologies Ltd (ENDU) is one of the largest 2W & 3W automotive component manufacturers in India. Its India business is focused on aluminium die castings & proprietary products (suspension, transmission and braking...

We met the top management of Endurance Technologies (ETL). There are multiple triggers for it to continue outperforming India 2Ws, driven by (1) penetration in scooters (34% of India 2Ws vs. 8% of ETL sales), (2) upcoming ABS/CBS norms (huge FY20 opportunity)

Endurances (ETL) Q2 consolidated EBITDA was in line with estimates. India revenue grew 10% YoY despite Bajaj Auto (~50% of ETLs India sales) posting muted growth of 2% in Q2.

We hosted the top management of Endurance Technologies (ETL) for investor meetings in the US and UK. While we've documented our positive view in several notes in the last year (starting with our initiation )

We met with Mr Anurang Jain (MD) and senior management of Endurance Technologies (ENDU) to discuss (i) strategic initiatives undertaken in its India business, (ii) evolving opportunities in India and EU (driven by changes in customer preference and government regulations) and (iii) strategic objectives. Our confidence in ENDU's growth outlook has strengthened further post this meeting, given that the company appears well placed to benefit from a) deeper penetration within the existing customer base and b) scooterization...