MOSL: ENDURANCE TECHNOLOGIES (Buy)-In-line-India beat estimates, EU misses; Ramp-up with HMSI continues
Endurance Technologies: In-line; India beat estimates, EU misses; Ramp-up with HMSI continues
(ENDU IN, Mkt Cap USD2.6b, CMP INR1235, TP INR1540, 25% Upside, Buy)
- Operating performance in-line: Consol. revenue grew 19.8% YoY to INR15.8b (est. of INR16b). EBITDA of INR2.2b was in line with our estimate of INR2.3b. Below-estimated RM cost (led by favorable mix, and pass-through of commodity inflation with a lag) was offset by higher other expenses. EBITDA margin stood at 14.1% v/s our estimate of 14.2%. There was an exceptional expense of INR269m toward Voluntary Separation Scheme as part of its plant consolidation activity in India. Adj. PAT grew 29% YoY to INR957m (est. of INR995m).
- India business – strong performance: Strong growth in the domestic 2W industry sales, along with ramp-up with HMSI and HMCL, led to S/A revenue growth of ~25% YoY to INR11.2b (in-line). After-market sales recovered, with growth of 19% YoY. EBITDA margin of 12.9% (est. of 12.6%) was higher by ~120bp YoY (+10bp QoQ). Adj. PAT was in line at INR660m (+40% YoY).
- EU subsidiary performance miss: EU business revenue grew ~9% YoY to INR4.6b (est. of INR4.8b). EBITDA margin of 17% missed our estimate of 18% due to higher other expenses (led by higher outsourcing). PAT grew 8.6% YoY to INR295m (est. of INR330m).
- Key highlights from earnings call: (a) Received LoI from HMSI for supply of 2.76m front forks by FY21 for all four HMSI plants, replacing its supply of shock absorbers; overall, this order is highly value-accretive for ENDU. (b) Received LoI from HMCL for aluminum die castings; supply would commence from Feb-18, with full ramp-up by end-FY19. (c) Received direct export order from KTM for mono-shock absorbers and inverted front forks for 37k sets for FY19 (v/s 25k sets in FY18). (e) Setting up a new plant at Karnataka to cater to HMSI; supply to commence from 1QFY20 with full ramp-up by end-FY20. (f) It expects to start supplying CVT to HMCL in 2HFY19, as the product is in the advanced stages of testing.
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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