MOSL: ENDURANCE TECHNOLOGIES (Buy)-Below-estimate-new biz wins, increasing content to drive strong growth
Endurance Technologies: Below-estimate; new biz wins, increasing content to drive strong growth
(ENDU IN, Mkt Cap USD2.5b, CMP INR1258, TP INR1476, 17% Upside, Buy)
- revenue grew 18% YoY to INR18.1b (our estimate: INR18.8b) in 3QFY19. Revenue in both India and EU businesses grew faster than underlying industry. EBITDA margin shrank 80bp YoY (-40bp QoQ) to 14% (our estimate: 14.8%) on account of one-offs in standalone (S/A) business (60bp) and RM inflation. Consol. PAT grew 16% YoY to INR1.1b (our estimate: INR1.2b). For 9MFY19, consol. revenue/EBITDA/PAT grew by 22%/20%/24% YoY.
- India business: S/A revenue grew ~23% YoY to ~INR13.3b (our estimate: ~INR13.6b). EBITDA margin shrank 130bp YoY (-80bp QoQ) to 12.1% (our estimate: 13.3%) owing to one-offs pertaining to shifting of production from Manesar to Pantnagar (50bp impact), the retrospective impact of an increase in tariff on certain imports (30bp) and RM inflation (~50bp). Adj. PAT increased 17% YoY to ~INR771m (our estimate: INR911m).
- EU business: Revenue grew 6% YoY to ~INR4.9b (our estimate: ~INR5.2b). CC revenue declined 1.4% YoY (v/s industry volume decline of 7.8%). EBITDA margin was in-line at 18.9%. PAT grew 14% YoY (+10% QoQ) to ~INR336m (our estimate: ~INR327m), led by higher other income.
- Key highlights from earnings call: (a) Won new orders worth INR1.9b in India business and EUR10.5m in EU business in 3QFY19. (b) Added TVSL as customer, with disc brake order worth INR400m p.a. (supply to commence from 3QFY20). (c) Won business with HMSI for supply of inverted front forks for 50k vehicles p.a. starting Jun’20. (d) ABS product expected to be delivered to OEMs for testing by Feb-end (production to commence from 3QFY20). (e) Acquisition of supplier Fonpresmetal would drive backward integration and strengthen aluminum die-casting business in EU.
Endurance Technologies Ltd (CN) is an India-based automotive component manufacturer company. The Company is engaged in manufacturing of aluminium die castings (including alloy wheels), suspension, transmission and braking products. The Companys products include aluminium die casting, which offers high pressure die castings, low pressure die castings, gravity die castings, and alloy wheels; suspension which offers shock absorbers, motorcycle front forks, and hydraulic & gas charged dampers, macpherson struts, gas springs for cars ; transmission which offers clutch assemblies, continuous variable transmissions (CVTs), and friction plates; and braking, which offers hydraulic disc brakes, tandem master cylinder assemblies, hydraulic drum brakes, and non-asbestos brake shoes.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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