Endurance Technologies Q4 Results Review - Above Estimate; Ebitda Margin Surprised Positively: Motilal Oswal

Motilal Oswal Report

Endurance Technologies Ltd. posted Ebitda margin expansion in the India and Europe businesses in Q4 FY23. As a result, consolidated Ebitda margin grew 140 basis point QoQ to 12.8% (our estimate: 12.1%).

We expect Endurance Technologies to sustain margin at the current level, aided by a recovery in the underlying industries, ramp-up in new orders and falling energy costs in Europe (lower by 25% QoQ so far).

We raise our FY24E/25E earnings per share by 5.8%/5.2% to factor in a gradual recovery in EU passenger vehicle production, lower energy prices and favorable currency benefits.

Highlights from the management commentary

India- Endurance Technologies has won new orders worth Rs 9.35 billion from origina equipment manufacturers in FY23 (excluding Bajaj Auto Ltd.), including Honda Scooters & Motorcycles India, Hero MotoCorp Ltd., Ather, MM, Hero Electric and Tata Motors Ltd. These orders include Rs 7.8 billion of new business and Rs 1.55 billion of replacement business.

Europe- Ebitda margin of 17.8% in Q4 was driven by 100% recovery in energy costs and 45% in credit assets given by the Italian government. The government has reduced the contribution to 20% from April 2023. However, Endurance Technologies expects the margin trajectory to remain positive as the reduction in incentives should be offset by lower energy costs, which fell 25% QoQ.

EV- Total business win for electric vehicles till date is Rs 6 billion (excluding Maxwell) and includes new business worth Rs 3.77 billion from Ather, Ampere and Hero Electric in FY23. New EV business orders contributed ~42% of total business (including Maxwell).

Maxwell- The company won new BMS business worth Rs 1.290 billion in FY23, including orders worth Rs 700 million from Hero Electric (supply to start from July 2023) and Rs 495 million from Ampere (supply to start from September 2023) in FY23.

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