EUR 120.00 For Business Accounts Only

MOSL: ENDURANCE TECHNOLOGIES (Buy)-Outperformance continues-best-ever margins led by incentives

Endurance Technologies: Outperformance continues; best-ever margins led by incentives, mix

(ENDU IN, Mkt Cap USD2.3b, CMP INR1169, TP INR1350, 15% Upside, Buy)

 

• revenue grew 9.5% YoY to INR19b (in-line). EBITDA margins expanded 230bp YoY (310bp QoQ) to 17.1% (our est. 14.4%), led by strong margins in India and EU business. Consol. PAT grew 28% YoY to INR1.5b (our est. INR1.2b). FY19 consol. revenue/EBITDA/adj. PAT grew 18%/22%/24%.
• India business revenues grew 8% YoY to INR13.4b (in-line). EBITDA margin expanded 260bp YoY (+340bp QoQ) to 15.5% (our est. 12.9%) led by incentives, decline in RM and better mix. Adj. PAT grew 35% YoY to INR1.1b.
• EU business revenues grew 12.5% YoY to INR5.6b (in-line), with CC revenue growing 10.9% YoY. EBITDA margin expanded 130bp YoY (+200bp QoQ) to 20.9%, driven by higher tooling revenues. Higher depreciation restricted PAT growth to 17% YoY at INR384m (our est. INR352m).
• Key highlights from earnings call: (a) In FY19, ENDU received new orders of INR10.3b in India and ~EUR60m in the EU business, taking the total Europe order book to EUR280-290m. (b) Share of proprietary business increased 2pp to ~51% in India. (c) In the castings business, focus was on margin improvement by increasing value-adds. (d) Delay in ABS product is due to the longer testing time under different road conditions. (e) Focus to increase Fonpresmetal EBITDA margins by 2% in FY20 through economies of scale as well as efficiency program. (f) FY20 capex: India - INR3b; EU - EUR25m.