Endurance Tech (ENDU), India's top aluminum die-casting company, is showing consistent improvement in its performance metrics.
This is fueled by increasing domestic demand, a recovery in the international market, and lower raw material costs.
ENDU is highly preferred among automotive ancillary firms due to its advanced product range and strong presence in the two-wheeler segment.
Outlook:
ENDU's robust order book is being driven by the recovery in demand. The company primarily focuses on the two-wheeler (2W) segment in the domestic market, benefiting from its advanced product range. This positions ENDU advantageously to capitalize on the expected growth in the 2W industry.
The positive outlook for ENDU is supported by the significant increase in demand for two-wheelers, as indicated by monthly wholesale figures from original equipment manufacturers (OEMs).
The management's confidence in the long-term potential of the Indian 2W segment is further reinforced by the company's order schedule, which anticipates a 10-12 percent industry growth in FY24.
During the first nine months of FY24, Endurance Tech secured new contracts worth Rs 941 crore from OEMs other than Bajaj Auto, with approximately 60 percent being new business and the rest replacement orders.
These contracts are expected to peak in FY26. Additionally, the company has obtained orders worth Rs 680 crore in the electric vehicle (EV) segment.
In terms of the European business outlook, Endurance Tech's management highlighted that the easing of supply constraints allowed OEMs to increase production.
Despite recessionary pressures affecting order intake, Endurance Tech successfully secured orders totaling 29 million euros during the same period.
In conclusion, Endurance Tech's strong position in the Indian two-wheeler segment, focus on electric vehicles, and favorable market conditions position it as a compelling player in the automotive industry.
Endurance Tech is expanding its product range by focusing on high-value offerings.
This includes brake-and-clutch assemblies for motorcycles with engine capacities exceeding 200 cc, ABS systems, paper-based clutches, inverted front forks, as well as fully machined and semi-finished castings.
The company has begun supplying ABS and brakes tailored for motorcycles with engine capacities of 200 cc and above, along with clutch plates.
As raw material prices decrease, enhanced margins are expected. The reduction in raw material expenses has already had a positive impact, and the decline in high energy prices in Europe has further strengthened the company's operating margin.
Additionally, management is actively working to improve cost efficiencies, introduce more valuable products, and replace imports, all of which are expected to contribute to further improvement in the operating margin.
Valuation:
Endurance Tech (ENDU) is currently trading at a valuation of 29.8 times the estimated earnings for FY25, which represents a discount of approximately 10 percent compared to its six-year average valuation of 32.7.
This discounted valuation suggests significant potential for an upward movement in the stock price. We recommend that investors gradually accumulate the stock.
There are several risks to consider:
1. Deceleration in demand: A slowdown in demand could negatively impact the company's financial performance.
2. Unfavorable commodity prices: Higher raw material costs, due to unfavorable commodity prices, could affect operational profitability.
This is fueled by increasing domestic demand, a recovery in the international market, and lower raw material costs.
ENDU is highly preferred among automotive ancillary firms due to its advanced product range and strong presence in the two-wheeler segment.
Outlook:
ENDU's robust order book is being driven by the recovery in demand. The company primarily focuses on the two-wheeler (2W) segment in the domestic market, benefiting from its advanced product range. This positions ENDU advantageously to capitalize on the expected growth in the 2W industry.
The positive outlook for ENDU is supported by the significant increase in demand for two-wheelers, as indicated by monthly wholesale figures from original equipment manufacturers (OEMs).
The management's confidence in the long-term potential of the Indian 2W segment is further reinforced by the company's order schedule, which anticipates a 10-12 percent industry growth in FY24.
During the first nine months of FY24, Endurance Tech secured new contracts worth Rs 941 crore from OEMs other than Bajaj Auto, with approximately 60 percent being new business and the rest replacement orders.
These contracts are expected to peak in FY26. Additionally, the company has obtained orders worth Rs 680 crore in the electric vehicle (EV) segment.
In terms of the European business outlook, Endurance Tech's management highlighted that the easing of supply constraints allowed OEMs to increase production.
Despite recessionary pressures affecting order intake, Endurance Tech successfully secured orders totaling 29 million euros during the same period.
In conclusion, Endurance Tech's strong position in the Indian two-wheeler segment, focus on electric vehicles, and favorable market conditions position it as a compelling player in the automotive industry.
Endurance Tech is expanding its product range by focusing on high-value offerings.
This includes brake-and-clutch assemblies for motorcycles with engine capacities exceeding 200 cc, ABS systems, paper-based clutches, inverted front forks, as well as fully machined and semi-finished castings.
The company has begun supplying ABS and brakes tailored for motorcycles with engine capacities of 200 cc and above, along with clutch plates.
As raw material prices decrease, enhanced margins are expected. The reduction in raw material expenses has already had a positive impact, and the decline in high energy prices in Europe has further strengthened the company's operating margin.
Additionally, management is actively working to improve cost efficiencies, introduce more valuable products, and replace imports, all of which are expected to contribute to further improvement in the operating margin.
Valuation:
Endurance Tech (ENDU) is currently trading at a valuation of 29.8 times the estimated earnings for FY25, which represents a discount of approximately 10 percent compared to its six-year average valuation of 32.7.
This discounted valuation suggests significant potential for an upward movement in the stock price. We recommend that investors gradually accumulate the stock.
There are several risks to consider:
1. Deceleration in demand: A slowdown in demand could negatively impact the company's financial performance.
2. Unfavorable commodity prices: Higher raw material costs, due to unfavorable commodity prices, could affect operational profitability.
