Endurance Technologies revenue beat supports brake expansion and four-wheeler growth outlook

Investment View and Valuation

Motilal Oswal Financial Services (MOFSL) retains a BUY rating on Endurance Technologies, supported by a healthy order backlog, expected outperformance versus core industry growth in India and Europe, and a pipeline of braking, alloy-wheel, suspension and four-wheeler opportunities.

The broker forecasts consolidated revenue, EBITDA and adjusted PAT CAGRs of approximately 19%, 21% and 23%, respectively, over FY26-FY28. The target price is Rs 3,350, based on 32 times FY28E consolidated EPS. At the report CMP of Rs 2,899, the stock traded at 37 times FY27E and 28 times FY28E consolidated EPS.

1QFY27 Financial Performance

Endurance Technologies reported a mixed 1QFY27 outcome. Consolidated revenue grew 30% year-on-year to Rs 4,314.9 crore, ahead of MOFSL's Rs 4,065 crore estimate, driven by 36% growth in the Indian business. Consolidated EBITDA increased 20.7% year-on-year to Rs 535.8 crore, modestly above the broker's Rs 512.8 crore estimate.

Higher depreciation from new-plant ramp-up increased depreciation expense by 35% year-on-year to Rs 221.9 crore, resulting in consolidated PAT growth of only 8% to Rs 240 crore, below MOFSL's Rs 260 crore estimate. Maxwell turned PAT positive for the first time, reporting approximately Rs 1 crore of PAT.

European Business and Order Wins

European revenue rose 15% year-on-year in rupee terms to Rs 1,130 crore, although growth was only 1% in euro terms. MOFSL notes that European new-car registrations increased 7.4%, but much of the industry growth came from Chinese OEMs.

Management reported cumulative business wins since FY23 of Rs 5,720 crore, excluding Maxwell and battery packs. These included Rs 4,240 crore of new business. Management is targeting an increase in the four-wheeler contribution from 30% currently to 45%.

• Approximately Rs 510 crore of die-casting orders from four OEMs.
• The company's first four-wheeler drive-shaft order.
• Four-wheeler drum-brake orders from TMPV.
• Plans to enter four-wheeler suspensions with a Korean technology partner.

European 1QFY27 order wins were EUR13.9 million, including a Mercedes hybrid programme and a Stellantis ICE programme. The Mercedes programme is expected to start in January 2027 and has annual business potential of approximately EUR40 million.

Margin Outlook and Capacity Expansion

Management expects margin expansion from 2QFY27 as OEM price settlements incorporate higher raw-material, fuel, gas and manpower costs. Aluminium-alloy prices have softened, while settlements for steel, rubber, plastics and other inputs are expected during 2QFY27.

The braking business has delivered more than 30% CAGR over the past four years. ABS and CBS hydraulic-brake capacity expansion remains on schedule for start of production in September or early October 2026. A 12 million-unit annual-capacity dual-channel ABS programme for Bajaj Auto is scheduled for 2QFY27, followed by another 12 million-unit programme in 3QFY27. Management expects India capex in FY27 to be broadly similar to FY26 at Rs 800 crore.

Domestic Growth Drivers and Diversification

MOFSL expects domestic two-wheeler outperformance from the Bidkin alloy-wheel plant, which is expected to reach an annualised Rs 600 crore run rate from 4QFY27E. Other drivers include dual-channel ABS supplies, the Chennai brakes-facility start-up and the ramp-up of inverted front forks.

• Rs 300 crore battery-pack assembly order.
• Rs 200 crore solar-damper order from a Spanish OEM.
• Potential FY27 aluminium-forging revenue of Rs 140 crore.
• Expansion of the aftermarket business.

Earnings Estimate Changes

MOFSL revised FY27E and FY28E sales estimates upward by 3.4% and 6.2%, respectively. FY27E PAT and EPS were reduced by 1.5%, while FY28E PAT and EPS were raised by 4.5%.