MOSL: ENDURANCE TECHNOLOGIES (Buy)-In-line-new order wins lead to higher capex guidance

Endurance Technologies: In-line; new order wins lead to higher capex guidance

(ENDU IN, Mkt Cap USD3.0b, CMP INR1468, TP INR1691, 15% Upside, Buy)

• revenue grew 24% YoY to INR18.6b (in-line). EBITDA margin expanded 40bp YoY (-20bp QoQ) to 14.6% (est. of 14.3%), led by the benefit of operating leverage. Adj. PAT was in line at INR1.2b (+29% YoY, 7% QoQ).
• India business: S/A revenue grew ~27% YoY to ~INR13.1b (in-line), which was faster than underlying industry volume growth, indicating a continued increase in content per vehicle. This was led by continued market share gains with OEMs like HMSI, HMCL and RE. EBITDA margin expanded ~40bp YoY (+60bp QoQ) to 13.5% (est. of 13%), driven by lower-than-estimated RM cost and other expenses. PAT grew 33% YoY to ~INR901m (est. of ~INR884m).
• EU - constant currency growth at 3.6% YoY: EU business revenue grew 17% YoY to ~INR5.5b (est. of ~INR5.2b). Revenue grew 3.6% YoY in EUR terms, as against European PV market growth of 4.5%. Although RM costs and other expenses were below our estimate, higher staff cost (due to new business with VW) led to EBITDA margin of 17.1% (+50bp YoY, -250bp QoQ) coming in lower than our estimate of 17.8%. Higher tax and lower other income restricted PAT growth to 21% YoY (+5% QoQ) at INR345m (est. of INR376m). VW business grew ~107% in 1QFY19, contributing ~16% of EU revenue.