Endurance Tech rating- Buy: Firm’s the best play on the 2W industry

ENDU is on the proper facet of each clients and expertise.

After a sluggish recovery publish lifting of COVID-related restrictions, we consider that the underlying demand drivers for 2Ws are nonetheless intact and anticipate 2W demand to return to 6-8% CAGR over the subsequent 5 years. We want ENDU over 2W OEMs as the best technique to play the 2W industry, provided that the company has a robust positioning with all OEMs and is the beneficiary of the underlying pattern in premiumisation, scooterisation, and electrification.

ENDU has a number of levers to proceed to develop quicker than the underlying 2W industry, pushed by: (i) cross promoting and consumer mining; (ii) provides to e-2Ws/3Ws, (iii) ABS; and (iv) brakes and clutches for over 200cc Bikes. This ought to assist in growing content material per car and slim content material hole between OEMs (BJAUT at 15-17% v/s RE at 11-13% v/s different OEMs at 5-7% v/s TVSL at 3-4%).

The company has seen good traction in its nascent Passenger Vehicle (PV) section (~5% of standalone gross sales in FY20) in the Aluminum Die-casting business. ENDU is on the proper facet of each clients and expertise. On the buyer facet, it’s working with the quickest rising OEMs in the Indian PV industry. Based on present orders from Hyundai/Kia, its income run-rate is anticipated to hit its peak annual run-rate of Rs 3.1 bn by Q4FY22 (v/s lower than Rs 1 bn in FY20).

We estimate consolidated income/ Ebitda/PAT of ~8%/13%/18% CAGR over FY20-23E. The stock trades at 27.2x/22.3x FY22e/FY23e consolidated EPS. Maintain Buy with a TP of Rs 1,750 per share (28x Mar’23e consolidated EPS).

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