17 March 2020
Update | Sector: Automobiles
TP: INR1,025 (+42%)
All EU plants working, but utilizations down
India business as usual, but 1QFY21 to be slow on BS6 transition
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
We interacted with the senior management of Endurance Technologies (ENDU) to get an
101.8 / 1.4
1237 / 701
update on the company’s business/industry. ENDU’s management has stated that both
its businesses are so far operating without any material impact of disruption caused by
the Coronavirus (COVID-19). Key insights highlighted below:
Financials Snapshot (INR b)
Adj. EPS (INR)
EPS Gr. (%)
Div. Yield (%)
FCF Yield (%)
Shareholding pattern (%)
Dec-19 Sep-19 Dec-18
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
All of ENDU’s 9 plants (6 in Italy + 3 in Germany) in EU are operational.
ENDU’s plants in Italy are primarily located in the Turin region, while Lombardy
and Venice regions are facing shutdowns (quarantine). Even its collaborator,
Adler’s plant in Milan is operational.
EU operations are meeting 100% of its production schedules
and have not lost
any business, though operating rates have reduced.
Over the last 6-7 years, Italian plants have strategically shifted focus toward
German customers, which is now reflected in Volkswagon (VW) group being its
largest customer. German plants can partly make up for the short fall of Italian
plants if the situation worsens.
Production schedules in India are yet to see any material change.
1QFY21 could see some changes as they transit to BS6 in this environment. 2W
OEMs in the near term are focused on liquidating BS4 inventory, particularly
the few larger players.
ENDU has benefitted from the supply disruption in China.
One of the OEMs
has brought forward the sourcing of brakes from ENDU due to the disruption.
Exports from India are so far normal.
ENDU exports machined castings to
Getrag in Mexico, the UK and France.
For its India operations, ENDU sources certain components from China.
However, it also has an alternate source for these components in India as well,
thereby ensuring continuity of operations.
Valuation and view:
We are lowering our consol EPS FY20/21 estimates to by
1%/8% to factor in for impact of coronavirus in EU business and our lowered
estimate for 2W industry volume growth. ENDU’s near-term operating
performance is expected to be influenced by the longevity of disruption in
Europe and the BS6 transition in India. Both these events are transitory in
nature but have created meaningful dislocation in price. Our positive view on
ENDU remains intact and is driven by the company’s strong positioning in 2W
OEMs as well as visibility of increase in content. Post the recent correction in
the stock price, valuations are reasonable at 17.4x/15.8x FY21/FY22E consol.
EPS. We also lower target multiple 22X (from 25x earlier) to factor in for risk of
prolonged impact of coronavirus. Maintain
with TP of INR1,025 (~22x
Mar’22E consol. EPS).
Research Analyst – Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
(Vipul.Agrawal@MotilalOswal.com) +91 22 7193 4322
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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