MOSL: ENDURANCE TECHNOLOGIES (Buy)-Strong beat in both businesses; ramp-up with key 2W players on track
Endurance Technologies: Strong beat in both businesses; ramp-up with key 2W players on track
(ENDU IN, Mkt Cap USD2.4b, CMP INR1176, TP INR1530, 30% Upside, Buy)
- Strong beat led by sharp revenue growth: Consol. revenue grew 29% YoY to INR17.9b (est. of INR16.7b). ENDU's revenue in both India and EU businesses grew faster than underlying industry volume growth, indicating continued increase in content per vehicle. EBITDA margin expanded 90bp YoY (+60bp QoQ) to 14.7% (est. of 13.8%), led by the benefit of operating leverage. Lower tax in India boosted consol. PAT growth to 39% YoY (INR1.16b v/s est. INR1b). For FY18, consol. revenue/EBITDA/adj. PAT grew 17%/23%/24%.
- India biz – industry tailwind, ramp-up with key customers drive growth: S/A revenue grew ~33% YoY to ~INR12.7b (est. of ~INR12b). While gross margin missed our estimate, the benefit of operating leverage offset the impact of higher RM cost, leading to in-line EBITDA margin of 12.5% (+70bp YoY, -40bp QoQ). PAT grew 56% YoY to ~INR819m (est. of ~INR724m).
- EU – commencement of VW order, weak INR drive strong growth: EU business revenue grew 22% YoY to ~INR5.1b (est. of ~INR4.7b), with 8.3% YoY growth in EUR terms. Benefit of operating leverage led to EBITDA margin expansion of 170bp YoY (+290bp QoQ) to 19.9% (est. of 16.6%), despite higher RM cost. As a result, PAT grew 25% YoY to ~INR328m (est. of ~INR278m). VW business grew ~75% in 4QFY18 (+37% in FY18), contributing ~18% to EU revenues in the quarter (v/s 13% for FY18). Management is confident of maintaining margins at FY18 level of ~18%.
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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