Gaining ground Endurance Technologies: Proven management at the helm

Endurance Technologies

BSE Sensex

26,519

S&P CNX

8,154

Endurance Automobiles

Initiating Coverage | Sector: Technologies

CMP: INR565

TP: INR715 (+27%)

Buy

Stock Info

Bloomberg code

Equity Shares (m)

52-Week Range (INR)

M.Cap. (INR b)

M.Cap. (USD b)

ENDU IN

140.7

675 / 519

79.5

1.2

Endurance Technologies (ENDU) is a large, diversified auto component supplier, with a

strong presence in India (~70% of consolidated revenue). Its India business is focused

on aluminum die castings and proprietary products – suspension, transmission and

braking systems – for two/three-wheelers (2W/3Ws). Its Europe business (30% of

revenue) is focused on high-value machined aluminum die castings and sub-

assemblies for passenger vehicles (PVs).

Gaining ground

Proven management at the helm



Financial Snapshot (INR b)

FY17E FY18E FY19E

INR million

Sales

EBITDA

EPS (Rs)

EPS Growth (%)

BV/Share (INR)

P/E (x)

P/BV (x)

EV/EBITDA (x)

EV/Sales (x)

RoE (%)

RoCE (%)

57.3

7.6

3.3

23.5

13.4

24.1

4.5

11.2

1.5

20.6

15.0

65.2

9.0

4.2

29.7

26.4

19.0

3.8

9.3

1.3

21.6

17.0

73.6

10.4

5.0

35.8

20.5

15.8

3.2

7.8

1.1

21.8

18.5



124.7 150.1 178.1



Endurance Technologies (ENDU) is a strong auto components supplier, with

diversified revenue streams – castings (62.8% of consolidated revenue),

suspension (23.3%), transmission (5.5%) and braking (4.6%) systems, and the

aftermarket segment (3.8%). India accounts for ~70% of its consolidated revenue.

With over 80% of its India revenue coming from 2W components, ENDU is well-

positioned to ride the wave of 2W demand revival, thanks to its large market

share in all the segments where it is present.

The European business, which constitutes ~30% of ENDU’s consolidated revenue,

has been growing profitably, driven by strong growth at FCA Italy, new customer

additions, and focus on high-value added products.

We expect strong EPS growth (~20% CAGR over FY16-19E) and steady return ratios

amid capacity expansion (RoE of ~22% in FY19E), driven by growing share of

proprietary business and increasing utilization. We initiate coverage with Buy;

our target price of INR715 (~20x FY19E EPS) implies 27% upside.

Riding on 2W demand recovery; could beat Indian 2W industry growth



Endurance

Technologies

Flying high



Please click here for Video Link

Venil.Shah@motilaloswal.com

91 22 3982 5445



ENDU’s product portfolio caters to nearly half the auto component

categories for 2W/3Ws – aluminum die castings, alloy wheels, and braking,

suspension and transmission systems.

The 2W segment contributes ~80% to ENDU’s standalone revenue and ~55%

to its consolidated revenue. More importantly, ENDU enjoys a strong market

share across all the sub-segments where it is present.

Additionally, ENDU’s content per 2W will continue to increase, driven by new

products (like ABS/CBS) and cross-selling potential among existing

customers.

Given its increasing penetration among 2W customers and commencement

of supplies to the Gujarat plants of HMSI and HMCL, ENDU is set to be a

huge beneficiary of the 2W demand recovery in FY18E/19E.

For the India business, we expect 12.3% revenue CAGR and 21.1% PAT CAGR

over FY16-19E.

16 December 2016

Endurance Technologies

European business to grow profitably



ENDU’s European business has been growing rapidly over the past 3-4 years,

aided by organic growth as well as acquisitions.

It has incurred major capital expenditure (including towards a new machining

plant) to drive business growth with its key customers in Europe.

ENDU’s strategy in Europe is focused on growing its share of value-added

products by increasing full machining of castings and sub-assemblies, as well as

adding high-value products.

Margins in the European business are likely to gradually inch upwards, driven by

increase in capacity utilization and further rationalization of content outsourcing

as part of its overall cost control initiatives.

We expect Europe business revenue to grow at a CAGR of 11.4% and PAT to

grow at a CAGR of 16.8% over FY16-19.

Large diversified business with expanding customer base



ENDU has evolved from a single customer/single segment player to a multi-

product, multi-customer business enterprise. It has diversified revenue streams

– castings (62.8% of consolidated revenue), suspension (23.3%), transmission

(5.5%) and braking (4.6%) systems, and the aftermarket segment (3.8%).

Though Bajaj Auto (~60% of standalone business) remains ENDU’s largest

customer, with the recent addition of HMSI and HMCL, ENDU now has a

presence among all the relevant 2W players in India.

The Europe business is focused solely on raw and machined aluminum die-

casting products, though it is continuously expanding its customer base. The FCA

Group accounts for 50% of ENDU’s Europe business; Daimler and other 4W

European OEMs account for the remaining 50%.

By investing in R&D and technology partnerships, ENDU has also managed to

develop products like suspension, transmission and braking systems.

ENDU’s management is focused on driving profitable growth, increasing cash

flow and improving capital efficiency, aided by its experience in carrying out

acquisitions in Europe just prior to the global financial crisis.

Valuation and view: Initiate with Buy rating



ENDU offers strong management, diverse revenue profile, improving

technological content, increasing customer wallet share, and financial discipline.

All this is reflected in the company’s strong growth prospects (revenue/EPS

CAGR of 12%/20% over FY16-19E) and robust return ratios (~22% RoE in FY19E).

The stock is trading at reasonable valuations of 19.0x/15.8x FY18E/19E

respectively. We initiate coverage with a Buy rating and a target price of INR715

(~20x FY19E EPS).

16 December 2016

Endurance Technologies

Story in charts

Exhibit 1: Sales CAGR of 12% over FY16-19E

22.5

Sales (INR m)

16.7

10.2

-0.2

6.6

9.3

Sales Growth (%)

13.8

12.9

Exhibit 2: PAT CAGR of 20% over FY16-19E

56.2

PAT (INR m)

PAT Growth (%)

26.4

15.4

13.4

20.8

-7.1

23.4

20.5

Exhibit 3: Geographic break-up (%)

Other, 1.9

Europe,

30.6

Exhibit 4: Improving market share in India business (%)

FY14

FY15

FY16

26.9 27.3

15.5 14.5 15.5

33.0

10.3 11.7

13.5

11.6

14.3

India, 67.5

Aluminium Braking Systems

Shock

casting and

Absorbers &

alloy wheels

Front forks

Transmission

Exhibit 5: Customer-wise break-up (%)

Remaining

customers,

17.7

Next 5

largest

customers,

19.5

Royal

Enfield, 6.0

Bajaj Auto,

41.4

Exhibit 6: Segment-wise break-up (%, consolidated)

Aluminium Casting

Braking Systems

3.6

3.4

4.4

4.8

6.1

5.2

22.8

23.6

Suspension

Aftermarket

3.8

4.1

4.6

4.8

5.5

5.6

23.3

24.1

Transmission

4.1

4.8

5.6

24.5

4.2

5.1

5.7

25.0

FCA Italy

S.p.A, 15.5

62.5

63.7

62.8

61.5

60.9

60.1

FY14

FY15

FY16

FY17E

FY18E

FY19E

Exhibit 7: Stupendous business growth over FY06-16 (INR m)

Sales

EBITDA

PAT

52,406

Exhibit 8: Only a few large-scale, multi-product auto comps

(INR b)

53.1

36.7

14.5 14.9 17.4

7.4

43.1

16.1

9.5

12.0

5,009

6,766

688

FY06

336

FY16

2,912

16 December 2016

Endurance Technologies

Well-positioned to ride 2W demand recovery wave

~80% of standalone revenue contributed by 2W segment



We expect the 2W demand in India to steadily recover in FY18E/19E, as the

shock of demonetization wanes gradually. Normal monsoon coupled with 7th

Pay commission benefits would led to recovery in demand, on back of low

base of last two years (FY14-16 CAGR of 5.8%). We expect a CAGR of 10% in

2W industry volumes over the period FY16-19E.

The 2W segment contributes ~80% to ENDU’s standalone revenue and ~55% to

its consolidated revenue. More importantly, ENDU enjoys a large market share

in all the segments where it is present. Additionally, ENDU’s content per 2W

will continue to increase, driven by new products (like ABS/CBS) and cross-

selling potential among existing customers.

Given ENDU’s rising penetration levels among 2W customers and pickup in

supplies to the Gujarat plants of HMSI and HMCL, the company is all set to

become a significant beneficiary of the 2W demand recovery.

ENDU’s India business has grown at a CAGR of 7.3% over the last four years,

despite a slowdown in the 2W industry (CAGR of 5.3%). We expect ENDU to

continue growing faster than the 2W industry (CAGR of 12.4% v/s 11.3% in 2W

over FY16-19E), as it continues to add new customers and gain share of the

customers’ wallet.

Dominant player in Indian 2W auto components segment



In terms of value, the segments in which ENDU operates constitute ~45% of the

total size of the auto components for 2W/3Ws.

Castings (including alloy wheels) form the biggest chunk of ENDU’s revenue,

followed by suspensions.

ENDU is now a supplier to almost all 2W manufacturers in India and partners

with them for supplying suspension systems, despite strong competition from

deeply entrenched players such as Gabriel, Munjal Showa, etc.

Exhibit 9: Present in a wide gamut of products in the two-wheeler space

Source: Company, MOSL

16 December 2016

Endurance Technologies

Exhibit 10: Standalone revenue mix (%; ex-replacement)

Transmission

Braking

Systems

Exhibit 11: Segment-wise market share (%)

33.0

15.5

Aluminium

Casting

50%

Aluminium

Casting

Source: MOSL, Company

Suspension

14.3

13.5

Suspension

35%

Transmission Braking Systems

Source: MOSL, Company

Exhibit 12: Dominant player in 2W auto components segment

ENDU’s revenue from the segment in FY16

Castings & alloy wheels

Suspension

Transmission

Braking systems

Market share

Castings & alloy Wheels

Suspension

Transmission

Braking systems

(INR m)

17,235

12,224

2,859

2,433

(%)

15.6

33.0

14.1

13.5

Source: MOSL, Company

Exhibit 13: A snapshot of business segments (domestic segments)

Business Division

Aluminum castings

Aluminum alloy wheels

Brake systems

Telescopic front

forks/shock absorbers

Clutch assemblies

CVTs

Segment

2W/3W (India)

2W/3W

Segmental

Revenue

(INR b)

17.2

2.4

12.2

2.9

Market

Sh. (%)

15.5

13.5

33.0

14.3

Competition

•

Sunbeam, Rico Auto, Sundaram Clayton, Jay Hind Inds.

Enkei Wheels, Rockman Inds. and Chinese competitors

ASK Auto, Allied Nippon, Brembo, Bosch, Continental, NISSIN

Gabriel, Munjal Showa, Showa India

FCC, Makino, Exedy, Rico

FCC, Exedy (transmission systems)

Source: MOSL, Company

Growing faster than 2W industry on new customer additions



ENDU’s India business has grown at a CAGR of ~7.3% over the last four years,

despite a slowdown in the 2W industry (CAGR of 5.3%), on the back of new

customers and increase in its content per vehicle.

ENDU has diversified into new categories such as suspension, transmission and

braking systems (collectively “proprietary systems”), aided by its technology

partnerships and strong customer relationships. As a result, the share of these

profitable proprietary systems in the company’s revenue has been steadily

increasing (46.9% in FY16 v/s 58.5% in FY10).

ENDU is focusing on further ramping up the contribution from proprietary

systems over the next few years, driven by a ramp-up in segments like brakes

(including ABS/CBS), transmission systems, etc.

16 December 2016

Endurance Technologies



We expect ENDU to continue growing faster than the 2W/3W industry (CAGR of

12.4% v/s 11.3% in 2W over FY16-19E), as it continues to add new customers

and gain share of the customers’ wallet.

Exhibit 14: Domestic business break-up (%; category-wise)

Aluminium Casting

4.6

5.9

8.3

32.0

5.0

6.7

7.3

31.9

Suspension

5.4

6.6

7.8

33.3

Transmission

5.8

6.8

7.9

34.2

Braking Systems

5.8

6.8

7.9

34.6

Aftermarket

5.8

7.1

8.0

34.9

49.2

49.1

46.9

45.3

44.9

44.2

FY19E

FY14

FY15

FY16

FY17E

FY18E

Source: MOSL, Company

Exhibit 15: Increasing market share despite Bajaj’s muted volumes

(INR b)

Aluminum casting and alloy wheels

ENDU aluminum casting and alloy wheels

Market Share (%)

Braking Systems

ENDU braking systems

Market Share (%)

Shock Absorbers & Front forks

ENDU Shock Absorbers & Front forks

Market Share (%)

Transmissions

ENDU transmissions

Market Share (%)

FY14

15.3

15.5

1.8

10.3

10.0

26.9

2.6

13.5

FY15

119

17.2

14.5

2.3

11.7

11.2

27.3

2.6

11.6

FY16

111

17.2

15.5

2.4

13.5

12.2

33.0

2.9

14.3

Source: MOSL, Company

Exhibit 16: India business outgrowing 2W+3W production growth

ENDU’s revenue growth in India (INR m)

YoY Growth (%)

2W+3W production (units)

YoY Growth (%)

FY15

34,025

12.7

19,448,991

9.8

FY16

35,595

4.6

19,763,736

1.6

Source: MOSL, Company

16 December 2016

Endurance Technologies

Exhibit 17: Growth in 2W segment to aid ENDU’s domestic revenue growth

Revenue growth (%)

14.8

7.4

1.9

12.4

9.5

4.7

1.8

8.6

2W volume growth (%)

14.7

10.0

12.0

13.7

12.0

-1.9

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

Strong business traction reflecting in financial performance



We expect ENDU’s India business to record steady revenue CAGR of ~12% over

FY16-19, on revival in 2W industry growth after a dull growth phase in the last

four years.

EBITDA margin is likely to expand 130bp over FY16-19 to 13.3%, as product mix

shifts towards proprietary systems and capacity utilization from the Pantnagar

plant improves as Bajaj’s volumes recover and excise duty anomalies end.

Consequently, we expect PAT to grow at a CAGR of ~21% over FY16-19.

Exhibit 18: Revenue to grow at a CAGR of ~12% over FY16-19

Revenues (INR m)

14.8

% YoY

14.7

8.6

4.7

-1.9

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

13.7

12.4

Source: MOSL, Company

Exhibit 19: EBITDA growth accelerated by improving margins

19.6

EBITDA (INR m)

% YoY

20.6

17.6

6.7

2.7

-4.4

10.1

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

16 December 2016

Endurance Technologies

Exhibit 20: Expect India business PAT to grow at a CAGR of 21% over FY16-19

48.6

PAT (INR m)

% YoY

20.9

13.3

-4.8

27.8

14.0

21.9

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

Customer concentration risk reducing sharply due to increasing business

traction among new customers



Bajaj still remains ENDU’s major customer, by far. However, given the weakness

witnessed in Bajaj’s volumes over the past four years and stronger growth

recorded by other players, its share in the company’s overall business has

declined to ~40% (v/s 51.5% in FY10).

As the manufacturing plants of HMSI and Hero in Gujarat hit peak volumes,

Bajaj’s contribution to ENDU’s overall business is expected to decline further.

Moreover, with the addition of marquee customers in the European business,

Bajaj’s contribution to ENDU’s consolidated revenue is also expected to decline

further.

Increase in contribution from Getrag (~50% of exports), from ~INR750m to

~INR1.8b over the next three years would help reduce client concentration.

Also, commencement of exports to South-East Asia at the behest of one of the

top-3 domestic customers would help diversify revenue and help it to grow

faster than the industry.

Exhibit 21: Bajaj's share in ENDU’s business declining over past three years (%)

Bajaj Auto

FCA Italy S.p.A

Royal Enfield

Next 5 largest customers

Remaining customers

FY14

48.4

14.1

3.3

18.4

15.9

FY15

44.0

14.5

4.5

19.3

17.7

FY16

41.4

15.5

6.0

19.5

17.7

Source: MOSL, Company

16 December 2016

Endurance Technologies

Strong presence among 2W OEMs – yet, significant white spaces to grow

Bajaj

Auto

Aluminum Casting and Machining

Cylinder Heads

Crown handles

Aluminum alloy wheels

Suspension

Shock Absorbers

Front Fork

Transmission

Clutch Assemblies

CVTs

Friction plates

Brak ng

Hydraulic disc brakes assemblies

Rotary brake discs

Royal

Enfield

Yamaha

Honda

Hero

Suzuki

H-D













































Source: MOSL, Company

Exhibit 22: Estimated break-up of domestic revenue increase (INR m)

4,803

647

800

51,985

45,735

4,271

35,954

2,401

1,281

250

39,886

977

600

Source: MOSL, Company

16 December 2016

Endurance Technologies

Profitable growth in European business

Increasing clients, healthy margins, and improving RoCE



ENDU’s Europe business has grown at a rapid pace over the past 3-4 years,

aided by organic growth as well as acquisitions.

It has incurred major capital expenditure (including towards a new machining

plant) to drive business growth with its key customers in Europe.

ENDU’s strategy in Europe is focused on growing its share of value-added

products by increasing full machining of castings and sub-assemblies and

adding high-value products.

Margins in the Europe business are likely to gradually inch upwards, driven by

increasing capacity utilization and further rationalization of content

outsourcing as part of the company’s overall cost control initiatives.

Strong relationship with FCA Group



ENDU has a strong relationship with the FCA Group, which remains its second

largest customer.

It supplies components used in the engines of a variety of brands belonging to

FCA Italy S.p.A., such as Jeep, Chrysler, Alfa Romeo, Abarth, Fiat and Lancia.

ENDU’s revenues from FCA Italy S.p.A. have increased primarily due to the

acquisition of Endurance FOA.

Going forward, given the addition of a new machining plant in Germany, we

expect a gradual decline in FCA’s share in ENDU’s Europe business.

Exhibit 23: FCA to remain an important customer for ENDU's Europe business

Share in European revenues (%)

52.7

47.5

49.6

Share in Cons revenues (%)

51.6

50.7

50.2

14.1

14.5

15.5

15.7

15.1

14.7

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

Expanding client base with addition of Daimler and other 4W OEMs



ENDU had entered Europe with the acquisition of Endurance Amann, its German

subsidiary, in FY07 and the acquisition of Endurance Fondalmec, its Italian

subsidiary, in FY08. In Europe, ENDU manufactures a wide range of raw and

machined aluminum die-casting products, such as components for engines,

transmissions and vehicle bodies. ENDU also manufactures components for

aspirated and turbocharged engines, many of which are required to meet Euro

VI emissions standards.

In Europe, the number of ENDU’s plants has increased from three in FY14 to

seven as of 2QFY17. We expect the commissioning of the additional machining

plant at Massenbachhausen, Germany to further aid revenue growth. The

16 December 2016

Endurance Technologies



increase in ENDU’s supplies to Daimler and other customers in Germany will

help reduce the company’s dependence on Fiat. In FY15, there was a strong

growth in ENDU’s non-FCA revenues due to the commencement of new

business from Daimler.

In FY16/FY17, there was a mix shift towards FCA owing to a strong growth

recorded by FCA Italy (~20% YTD CY16).

Exhibit 24: Share of non-FCA revenues set to rise from FY18, as new plant ramps up

FCA Italy S.p.A

ex-FCA Italy S.p.A

47.3

52.5

50.4

48.4

49.3

49.8

52.7

47.5

FY15

49.6

FY16

51.6

FY17E

50.7

FY18E

50.2

FY19E

FY14

Source: MOSL, Company

Exhibit 25: Growth in Europe business to be boosted by new client additions

60%

45%

30%

15%

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

FCA Italy S.p.A (%)

non-FCA Italy S.p.A growth (%)

High entry barriers due to increased capex requirement and product

complexity



ENDU’s European business manufactures highly complex engine and

transmission components, which requires significant capex and technology

capability.

Its strategy in Europe is focused on growing the share of value-added products

by (a) increasing full machining of castings and sub-assemblies, (b) adding

products such as structural parts, and large and complex engine and

transmission castings, and (c) offering higher strength and elongation options by

providing Silafont alloy and heat treatment for structural parts like front axle,

cross members and shock towers.

ENDU gained entry into Europe on the back of acquisitions, the major ones

being (a)

Endurance FOA SpA,

which produces large and complex aluminum

casting, and (b) the asset acquisition of

Grana's business division,

which is

engaged in the production of engineering molded plastic components.

16 December 2016

Endurance Technologies



To drive business growth with its key customers in Europe, ENDU has incurred

major capital expenditure towards the purchase of new high-pressure die

casting machines and CNC machines, and the construction of a new facility in

Germany.

There has been an improvement in the capital efficiency of the European

business through diversification of product technology and material solutions,

increasing machining automation for high-volume products, and introduction of

higher-tonnage machines.

Strong financial metrics



ENDU’s strategy in Europe has revolved around expanding, with particular focus

on profitable growth, high margin products, and marquee customers. In Europe,

the number of ENDU’s plants has increased from three in FY14 to seven as of

2QFY17. With the commissioning of an additional machining plant in Germany in

4QFY17, its revenue growth in Europe is likely to step on the fast track.

We expect ENDU’s European subsidiaries to record steady revenue CAGR of

11.4% over FY16-19 on the back of increased business from non-FCA customers

such as Daimler and VW group. The commencement of its new machining plant

at Massenbachhausen, Germany in 4QFY17 is also likely to significantly boost

the company’s revenue.

Margins in the Europe business are likely to remain high, driven by focus on

profitable orders and continued rationalization of content outsourcing as part of

the company’s overall cost control initiatives.

Any further increase in machining mix from the ~90% levels is also expected to

aid the company’s margin improvement.

Exhibit 26: Revenue CAGR of ~12% over FY16-19E

Revenues (INR m)

29.1

14,070

11,038

4.0

-1.3

FY13

FY14

FY15

FY16

10,900

11.3

11.0

12.0

11.1

15,666

17,385

% YoY

19,468

21,637

FY17E

FY18E

FY19E

Source: MOSL, Company

16 December 2016

Endurance Technologies

Exhibit 27: EBITDA CAGR of ~14% over FY16-19E to be led by 110bp margin expansion

EBITDA (INR m)

38.9

2,714

1,550

-4.2

1,905

1,371

-11.6

FY14

FY15

23.1

15.8

2,344

FY16

FY17E

FY18E

FY19E

% YoY

3,116

3,490

14.8

12.0

FY13

Source: MOSL, Company

Exhibit 28: Asset turns inch higher, as capex intensity tapers, leading to improved RoCE

18.7

Gross Asset Turn (x)

17.3

13.7

1.5

1.6

1.4

14.1

1.3

11.9

1.1

11.1

1.1

13.0

1.1

RoCE (%)

14.8

1.1

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

16 December 2016

Endurance Technologies

Large diversified business with expanding customer base

Well-diversified business model + large segmental market share = Strong

auto components supplier

Well-diversified

business model

Large segmental

market share

Strong auto

components supplier



ENDU is a strong auto components supplier with significantly diversified

revenue streams. Its business is driven mainly by the aluminum casting and

machining segment, which contributes ~60% of its overall sales.

Apart from being a major player in the aluminum casting segment in India,

ENDU has also managed to enter and gain significant market share in other

segments such as suspension products, and transmission and braking systems

on the back of its technology partnerships and strong customer relationships.

The European business manufactures a wide range of raw and machined

aluminum die-casting products such as components for engines, transmissions

and vehicle bodies, and supplies the products mainly to the FCA Group,

Daimler and a few other OEMs.

ENDU’s focus on diversifying and expanding its customer base is reflected in

the reduction in its client concentration, with Bajaj now contributing just ~42%

of the company’s revenue (down from 95% in 2006).

Exhibit 29: Revenue break-up (consolidated; %)

Braking

Systems, 4.6

Transmission,

5.5

Aftermarket,

3.8

Suspension,

23.3

Aluminium Casting

and Machining,

62.8

Source: MOSL, Company

16 December 2016

Endurance Technologies

Exhibit 30: Share of customers in revenues

Customer-wise

Bajaj Auto

% YoY

% of revenues

FCA Italy S.p.A

% YoY

% of revenues

Royal Enfield

% YoY

% of revenues

Next 5 largest customers (incl HMSI)

% YoY

% of revenues

Remaining customers

% YoY

% of revenues

Total

% YoY

FY14

20,237

48.4

5,895

14.1

1,376

3.3

7,689

18.4

6,658

15.9

41,854

FY15

21,238

4.9

44.0

6,981

18.4

14.5

2,183

58.6

4.5

9,330

21.3

19.3

8,573

28.8

17.7

48,305

15.4

FY16

21,396

0.7

41.4

8,014

14.8

15.5

3,119

42.9

6.0

10,067

7.9

19.5

9,135

6.6

17.7

51,730

7.1

FY17E

21,491

0.4

37.5

8,975

12.0

15.7

4,386

40.6

7.7

12,080

20.0

21.1

10,362

13.4

18.1

57,295

10.8

FY18E

23,898

11.2

36.6

9,873

10.0

15.1

5,483

25.0

8.4

15,100

25.0

23.1

10,971

5.9

16.8

65,325

14.0

FY19E

27,039

13.1

36.6

10,860

10.0

14.7

6,316

15.2

8.6

18,120

20.0

24.6

11,456

4.4

15.5

73,791

13.0

Source: MOSL, Company

Exhibit 31: Geography-wise revenue share (%)

Europe,

30.6

Other,

1.9

India, 67.5

Source: MOSL, Company

Diverse businesses in India…



ENDU’s domestic business is led by the aluminum casting and machining

segment, which contributes ~47% of its domestic revenue.

In India, ENDU manufactures a diverse range of automotive components for the

two-wheeler and three-wheeler segments. The company’s major products are:



Raw and machined aluminum castings, such as high-pressure, low-pressure

and aluminum alloy wheels for motorcycles.



Suspension system products such as shock absorbers for scooters,

motorcycles and three-wheelers, front forks for motorcycles and scooters,

and hydraulic dampers for quadricycles.



Transmission system products such as clutch assemblies, cork and paper-

based friction plates for motorcycles and three-wheelers, and continuous

variable transmission assemblies ("CVTs") for scooters.



Braking systems such as hydraulic disc brake assemblies, including calipers,

master cylinders and rotary disc brakes for motorcycles, and hydraulic drum

brake assemblies and tandem master cylinder assemblies for three-

wheelers.

16 December 2016

Endurance Technologies

Exhibit 32: Revenue break-up (standalone; %)

Braking

Systems,

6.6

Aftermarket,

5.4

Aluminium Casting

and Machining,

46.9

Transmission,

7.8

Suspension,

33.3

Source: MOSL, Company

Exhibit 33: Dominant player in the 2W auto components segment

Revenues from the segment

Castings

Braking systems

Suspension

Transmission

(INR m)

17,235

12,224

2,859

2,433

Source: MOSL, Company

…with strong market share across segments



Despite being a major player in the aluminum casting segment (declining trend

in share of business over the past decade from ~80% in FY06), ENDU has gained

significant market share in other categories such as suspension products, and

transmission and braking systems (collectively “proprietary systems”), on the

back of its technology partnerships and strong customer relationships.

The company enjoys a market share of 14-33% across categories, with the

highest market share of ~33% in suspension systems.

Exhibit 34: Dominant player in 2W auto components segment

Market Share

Castings & Alloy Wheels

Braking systems

Suspension

Transmission

(%)

15.6

13.5

33.0

14.1

Source: MOSL, Company

Close customer relationships with a variety of OEMs



ENDU’s largest customers in India are Bajaj Auto, Royal Enfield, Honda and

Yamaha. It has had a long-standing relationship with Bajaj, which is by far, its

largest customer.

ENDU’s strong association with Bajaj is not only due to their long history of

working together in product development, leading to strong inter-dependence,

but also on account of the company’s high quality, cost and delivery standards.

Apart from these customers, ENDU also supplies to various other OEMs in India,

such as Hero, Mahindra, Suzuki, H-D Motor Company India, and Fiat India.

In Europe, ENDU’s largest customer is FCA Italy. It also supplies to Daimler as

well as to other reputable four-wheeler OEMs operating from Europe.

16 December 2016

Endurance Technologies



ENDU’s focus on diversifying and expanding its customer base is reflected in the

reduction in its client concentration, with Bajaj now contributing just ~42% of its

total revenue (down from 95% in 2006).

Remaining

customers, 17.7

Exhibit 35: Revenue share (client-wise; %)

Next 5 largest

customers, 19.5

FCA Italy S.p.A,

15.5

Bajaj Auto,

41.4

Royal Enfield, 6.0

Source: MOSL, Company

Exhibit 36: OEM mix shifting away from Bajaj Auto (%)

Bajaj Auto

FCA Italy S.p.A

15.9

18.4

3.3

14.1

48.4

Royal Enfield

Next 5 largest customers

17.7

19.3

4.5

14.5

44.0

FY15

Remaining customers

17.7

19.5

6.0

15.5

41.4

FY16

Source: MOSL, Company

FY14

Strong in-house R&D capabilities and technology alliances



ENDU has diversified into different product segments mainly due to its R&D and

technological capabilities. It has 167 R&D engineers, designers, technicians and

support staff in India, as well is at its overseas facilities.

It has acquired and developed strong R&D capabilities, including product design,

reverse engineering, product simulation, prototyping and testing. ENDU’s

technology partners include WP Performance Systems GmbH, Adler SpA, a

leading global brake and a suspension company, and a European brakes

technology provider.

ENDU has also been focusing on new technologies such as combined braking

systems and anti-lock braking systems to comply with future Indian regulatory

requirements.

Recently, ENDU acquired ~26 acres of land in Aurangabad to develop an

automotive proving ground (test track), which is expected to become

operational by the end of 2018. It is also setting up a dedicated technology

center in Italy for foundry, machining and assembly-related process

technologies to develop structural aluminum castings for passenger cars. This

technology center will become operational from 4QFY17.

16 December 2016

Endurance Technologies

Exhibit 37: R&D expenses (standalone) increasing gradually

R&D expenditure (INR m)

0.93

0.73

% of sales

1.24

290

FY14

255

FY15

457

FY16

Source: MOSL, Company



ENDU’s technology tie-ups have not only ensured its entry and sustenance in

these product segments, but have also enabled the company to remain

technologically competitive in the market.

WP Performance

has agreed to provide ENDU on an exclusive basis the required

know-how and technology for manufacturing a new series of motorcycle

suspension components in consideration for a license fee. The terms of the

agreement allow ENDU to manufacture the suspension components in India,

and market and sell them to OEMs and replacement markets worldwide, except

to WP Performance’s customers.

Adler SpA

will provide ENDU with technical support on an exclusive basis in

India for developing and manufacturing transmission products related to two-

wheelers and three-wheelers for sale to markets in India and worldwide in

consideration for a technical services fee.

A leading global brake and suspension company

has agreed to provide ENDU

with technical assistance and licensing arrangements for manufacturing braking

systems and parts for use in LCVs and four-wheeler passenger vehicles in India,

and sell the products in any other country where new vehicles manufactured in

India are being sold and serviced.

ENDU has been granted exclusive rights to manufacture combined braking

systems in India and a non-exclusive right to sell the combined braking systems

in all countries by a

European braking technology provider.

Exhibit 38: Technology tie-ups to boost competitiveness

Technology Partner

WP Performance

Adler SpA

Leading global brake and

suspension company

European braking technology

provider

Area of tie-up

Suspension

components

Transmission products

Braking systems

Combined braking

systems

Year of tie-up

2015

2013

2012

2015

Agreement valid till

2025

2018

2017

2020

Source: MOSL, Company

16 December 2016

Endurance Technologies

Proven management lends confidence to future business trajectory



Over the past decade, ENDU’s management has been able to successfully

engineer the company’s transition from a largely single customer player with

high concentration of business coming from the casting business to a multi-

product, multi-customer business enterprise.

ENDU’s investments in R&D and technology partnerships has helped it develop

products for other business segments, such as suspension, transmission systems

and braking systems. As a result, the share of castings in the company’s total

revenues has declined, while that of the other components has increased.

ENDU began its journey as a supplier to Bajaj Auto (by virtue of family ties

between the companies’ promoters). ENDU supplies all the products in its

portfolio to Bajaj, whose share in its business has always remained high.

However, adding new customers has been the key growth driver for ENDU and a

feat few auto component suppliers in India have been able to accomplish.

During the global financial crisis of 2007-09, the European automotive industry

was adversely impacted by declining sales, overcapacity, intensifying

competition, high fixed cost structures, and significant employee pension and

health care obligations. ENDU’s management has remained focused primarily on

generating cash flow instead of only improving operating margin. The need for

leaner operations and focus on increasing capital efficiency has remained the

cornerstone of the overseas strategy of ENDU’s management.

FY06

5,009

688

13.7

336

4,027

1,102

3,150

2.9

5,083

95.1

73.2

FY16

52,406

6,766

12.9

2,912

35,138

14,556

8,295

0.6

35,595

16,145

41.4

62.8

CAGR FY06-16

26.5

25.7

24.1

24.2

29.4

10.2

Exhibit 39: Journey over the past decade - a snapshot

(INR m)

Sales

EBITDA

EBITDA Margin (%)

PAT

Gross Block

Net Worth

Debt

Debt/Equity (x)

Revenue breakup

India

Europe

Share of BAL in revenues (%)

Share of castings in revenues (%)*

21.5

81.6

Source: MOSL, Company| *share of castings as per FY08 instead of FY06

16 December 2016

Endurance Technologies

Expect strong improvement in consolidated financials

Drivers: Robust topline growth, margin expansion



The recovery in growth of the 2W industry and increase in wallet share of

customers is expected to aid ENDU’s revenue growth in India. Moreover, the

addition of a new machining plant at Germany and commencement of supplies

to other OEMs is likely to drive the company’s growth in Europe.

We expect ENDU to record consolidated revenue CAGR of ~12% over FY16-19,

led by a ~12% CAGR in both India and Europe businesses.

In FY16, ENDU recorded muted growth in casting revenue due to a decline of

15-20% in aluminum and steel prices. With prices now normalizing, we have

factored for the same and build some additional revenue growth in 2H due to

higher raw material prices.

Exhibit 40: Consolidated revenue CAGR of ~12% over FY16-19E

22.5

16.7

10.2

6.6

-0.2

9.3

Sales (INR m)

Sales Growth (%)

13.8

12.9

11.5

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

FY20E

Source: MOSL, Company

Exhibit 41: Broad-based growth across customers

Customer-wise (INR m)

Bajaj Auto

% YoY

FCA Italy S.p.A

% YoY

Royal Enfield

% YoY

Next 5 largest customers (incl. HMSI)

% YoY

Remaining customers

% YoY

Total

% YoY

FY14

20,237

5,895

1,376

7,689

6,658

41,854

FY15

21,238

4.9

6,981

18.4

2,183

58.6

9,330

21.3

8,573

28.8

48,305

15.4

FY16

21,396

0.7

8,014

14.8

3,119

42.9

10,067

7.9

9,135

6.6

51,730

7.1

FY17E

21,491

0.4

8,975

12.0

4,386

40.6

12,080

20.0

10,362

13.4

57,295

10.8

FY18E

FY19E

23,898

27,039

11.2

13.1

9,873

10,860

10.0

5,483

6,316

25.0

15.2

15,100

18,120

25.0

20.0

10,971

11,456

5.9

4.4

65,325

73,791

14.0

13.0

Source: MOSL, Company

Margin drivers in place for both businesses



We expect ENDU’s margins to improve due to an increase in its capacity

utilization, as capex intensity tapers off and there is a gradual increase in the

share of the proprietary business.

We expect margins of the India business to improve by ~130bp from FY16 to

FY19 (on the back of increasing capacity utilization and higher share of the

proprietary business). Margins of the Europe business should improve by

16 December 2016

Endurance Technologies



~110bp from 15% to 16.1% over FY16-19 (led by a shift towards bigger and more

complex castings).

With a topline growth of 12% and margin expansion of ~120bp, we expect a

CAGR of 20% in consolidated PAT over FY16-19.

Exhibit 42: Steady increase in proprietary business share to boost standalone margins (%)

Castings

Proprietary

50.8

50.9

53.1

54.7

55.1

55.8

49.2

49.1

46.9

FY16

45.3

FY17E

44.9

FY18E

44.2

FY19E

FY14

FY15

Source: MOSL, Company

Exhibit 43: Margins to inch upwards, with improving utilization across both businesses

EBITDA Margins (%)

13.4

12.9

12.8

12.3

12.9

13.8

13.2

14.1

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

Exhibit 44: PAT CAGR of ~20% over FY16-19E

56.2

PAT (INR m)

PAT Growth (%)

20.8

23.4

26.4

15.4

13.4

20.5

-7.1

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

16 December 2016

Endurance Technologies

Reducing capex intensity, improving margins/asset turns to boost return

ratios



ENDU’s capex intensity is likely to taper off, as the bulk of its capex is front-

loaded. The company’s India business is operating at a capacity utilization of

~70%, while the Europe business has ~95% capacity utilization.

The capex for the new European plant is almost complete, with the new

machining plant likely to be commissioned in 4QFY17.

We expect a significant improvement in ENDU’s return ratios (up ~300bp to

~18%), as its domestic business mix shifts in favor of the proprietary business,

and its European business benefits from increased scale of operations and slight

improvement in margins and asset turns.

Exhibit 45: Asset turns rise as capex intensity tapers off

Gross Asset turnover (x)

16.6

14.8

15.9

16.1

15.5

RoCE (%)

15.0

17.0

18.5

1.7

1.6

FY14

1.6

1.5

FY12

FY13

FY15

FY16

1.5

FY17E

1.5

FY18E

1.5

FY19E

Source: MOSL, Company

Strong free cash flow generation with tapering of capex intensity



We expect ENDU to generate a CFO of INR20.4b over the next three years

(FY17-19), aided mainly by its strong working capital management, despite

increasing scale of operations.

Given its reducing capex intensity, ENDU’s FCF generation is likely to remain

strong for the next two years. We expect the company to record a cumulative

consolidated FCF of INR7.7b over FY17-19.

ENDU’s net debt stands at INR6.2b. Given the strong FCF generation expected

over the period FY17-19, we expect the company to almost become net cash by

FY19E.

Exhibit 46: Strong FCF generation ahead as major capex already over

CFO (INR b)

FCF (INR b)

6.8

5.4

2.9

3.5

1.5

5.7

3.3

4.1

2.1

2.8

1.5

5.8

3.3

6.8

7.8

1.1

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: MOSL, Company

16 December 2016

Endurance Technologies

Valuations reasonable; initiate with Buy

Diversified, large-sized auto ancillary company at reasonable valuations



ENDU is one of the few auto ancillary companies in India to boast of a truly

diversified revenue base, both in terms of product lines as well as customer

base, but still offers consistently respectable RoE.

At the helm is a proven management, as evident in the sustained profitable

growth while entering new segments and significant market share gains.

We believe that the strength in ENDU’s business franchisee and its strong

management will help the stock continue commanding premium valuation

multiples in comparison to most domestic auto ancillary companies.

In the domestic auto ancillary space, there are only a handful of high-quality,

large-scaled, multi-product auto component suppliers. Considering ENDU’s

size and strong market share in its operating segments, we believe that the

stock should command a premium to its domestic peers.

Strong financial metrics clearly stand out vis-à-vis peers



We expect ENDU to record consolidated revenue CAGR of 12% over FY16-19, led

by growth in both its India and Europe businesses. The company’s consolidated

margins

are likely to improve by ~120bp over FY16-19.

Given the estimated EPS CAGR of ~20% over FY16-19, we believe that ENDU’s

growth profile clearly stands out from most of the other auto ancillary

companies in India.

With a cumulative FCF generation of INR7.7b over FY17-19E, we expect the

company to become net cash by FY19.

ENDU’s return ratios are likely to inch upwards, as the increased capacity

utilization leads to higher asset turns. We expect the company’s post-tax RoCE

to increase to 18.5% in FY19 from the current 15.5%.

Initiate coverage with Buy rating



ENDU offers a strong management, diverse revenue profile, improving

technological content, increasing wallet share of customers, and financial

discipline.

All this is clearly reflected in the company’s strong growth prospects

(revenue/EPS CAGR of ~12x%/~20% over FY16-19E) and robust return ratios

(RoE of ~22% in FY19E).

16 December 2016

Endurance Technologies

Exhibit 47: Domestic peers - Sales (ex-global subsidiaries) (INR b)

53.1

43.1

36.7

17.4

16.1

14.9

14.5

12.0

9.5

7.4

Alicon

Castalloy

Motherson Bharat Forge Endurance

Sumi

Technologies

WABCO

Mahindra CIE

Munjal

Showa

Gabriel

Sundaram

Suprajit

clayton

Engineering

Source: MOSL, Company| Revenues from India business alone



The expected demand revival in the auto industry and anticipated improvement

in margins and return ratios of ENDU’s domestic peers led to a sharp re-rating of

their valuation multiples over the past two years, with most players trading at a

premium to their historical multiples.

ENDU trades at 19x/15.8x FY18E/FY19E EPS, which is in line with average

multiples of its peers. This coupled with EPS CAGR of 19% over FY16-18E, strong

management and robust return ratios should drive a re-rating for the stock.

We initiate coverage on ENDU with a Buy rating and a TP of INR715 (~20x FY19E

EPS) in view of the company’s strong growth potential, diverse revenue profile

and robust return ratios over FY16-19E.

Considering ENDU’s earnings growth potential, management pedigree and

stability in capital efficiencies, we value it at ~20% discount to our target

valuations for peers like AMRJ and BHFC.

Sales

(INR b) FY16

57.3

14.5

14.9

17.4

7.4

383.9

75.5

54.1

9.5

126.0

OPM

(%) FY16

12.9

8.9

7.2

16.9

10.5

10.01

18.9

11.4

17.4

7.1

EPS CAGR

FY16-18E

19.7

13.9

12.0

27.5

22.1

27.9

12.0

22.7

29.5

n/A

RoIC

(%) FY16

16.0

19.8

13.8

20.1

11.3

18.9

10.3

16.5

12.7

EV/EBITDA -

FY18E

9.3

8.8

4.7

19.1

6.2

9.1

14.9

8.6

12.5

n/A

Exhibit 48: Domestic peers

Domestic Peers

Endurance Technologies

Gabriel

Munjal Showa

WABCO

Alicon Castalloy

Motherson Sumi

Bharat Forge

Mahindra CIE

Suprajit Engineering

Sundaram Clayton

Mcap

(INR b)

79.5

15.4

7.6

96.1

4.5

450.8

227.1

70.4

26.0

57.5

P/E - FY18E

19.0

15.8

9.9

28.9

13.4

20.5

26.7

17.5

19.3

n/A

Source: MOSL, Company

Exhibit 49: Global peers

Global Peers

Endurance Technologies

Brembo Spa

CIE Automotive

Showa Corp

Exedy Corp

F.C.C. Co Ltd.

Mando Corp

Aisin Sieki

Allison Transmission

Borg Warner

Mcap

(EUR m)

1,086

3,650

2,381

493

1,300

935

1,900

12,300

5,404

8,119

Sales (EUR m)

FY16/CY16E

782

2,073

2,631

1,950

2,029

1,264

4,538

24,488

1,621

8,273

OPM (%)

FY16/CY16E

12.9

18.2

14.6

6.6

14.23

12.9

9.2

11.2

33.7

16.6

EPS CAGR FY16-

18E/CY16E-18E

19.7

8.0

16.6

19.2

24.0

16.7

9.9

3.4

16.8

RoIC (%)

FY16/CY15

16.0

19.5

10.8

1.6

7.1

6.1

7.3

6.8

6.9

12.0

P/E -

FY18E/CY18E

19.0

16.7

11.9

8.7

11.7

11.6

10.8

12.9

25.3

11.2

EV/EBITDA -

FY18E/CY18E

9.3

9.5

7.0

2.2

4.3

4.1

6.3

4.8

12.1

6.8

Source: MOSL, Company

16 December 2016

Endurance Technologies

Bull and Bear case

Bull Case



Better-than-expected recovery in 2W demand, especially for ENDU’s key

customer Bajaj, resulting in revenue CAGR of ~16% for India business over FY16-

19E.

Sustained volumes from FCA Italy SpA and increase in volumes due to ramp-up

of new machining plant leading to revenue CAGR of 13.4% over FY16-19E.

India business’ EBITDA margin benefiting from increased utilization and higher

share of proprietary products, coupled with Europe business’ margins benefiting

from increase in utilization, mix shift towards larger, complex castings, and

further increase in machining mix for newer orders, resulting in consolidated

EPS CAGR of 24.2% over FY16-19E.

Higher market share, improved margins and better capital efficiencies driving

the stock’s re-rating.

In a bull case, we would value ENDU at 24x FY19E EPS to arrive at a TP of INR951

(68% upside).

Bear Case



Weaker-than-expected growth in 2W volumes, especially for ENDU’s key

customer Bajaj (also impacted by weak exports), resulting in revenue CAGR of

~10% over FY16-19E.

Decline in volumes from FCA Italy SpA after a strong CY16 and delay in ramp-up

of new machining plant leading to revenue CAGR of 9% over FY16-19E.

India business’ EBITDA margin remaining sluggish at ~12.5% and Europe

business’ margins also remaining flat at 1HFY17 levels, leading to consolidated

EPS CAGR of 10% over FY16-19E.

Weak earnings growth, leading to de-rating of the stock.

In a bear case, we would value ENDU at 18x FY19E EPS to arrive at a TP of

INR496 (~12% downside).

Exhibit 35: Scenario analysis suggests favorable risk-reward

India

Sales growth (%)

Margins (%)

Europe

Sales growth (%)

Margins (%)

Consolidated

Sales growth (%)

Margins (%)

Consolidated PAT

Growth (%)

Consolidated EPS

ROE (%)

P/E

TP (INR/shr)

Upside

FY17E

39,886

8.6

12.2

17,385

11.0

15.6

57,271

9.3

13.2

3,303

13.4

23.5

20.6

Base case

FY18E

45,735

14.7

12.8

19,468

12.0

16.0

65,203

13.8

4,174

26.4

29.7

21.6

FY19E

51,985

13.7

13.3

21,637

11.1

16.1

73,623

12.9

14.1

5,032

20.5

35.8

21.8

715

26.6

FY17E

40,621

10.6

12.4

17,698

13.0

15.9

58,319

11.3

13.5

3,515

20.7

25.0

21.9

Bull case

FY18E

48,202

18.7

13.1

20,173

14.0

16.4

68,375

17.2

14.1

4,473

27.2

31.8

23.1

FY19E

56,718

17.7

13.8

22,824

13.1

16.7

79,542

16.3

14.6

5,573

24.6

39.6

24.1

951

68.3

FY17E

39,151

6.6

12.2

16,915

8.0

15.1

56,066

7.0

13.1

3,145

8.0

22.4

19.6

Bear case

FY18E

43,718

11.7

12.4

18,603

10.0

15.2

62,321

11.2

13.2

3,489

10.9

24.8

18.1

FY19E

48,818

11.7

12.6

20,304

9.1

15.2

69,123

10.9

13.4

3,877

11.1

27.6

16.8

496

-12.2

Source: Company, MOSL

16 December 2016

Endurance Technologies

S W

O T

SWOT Analysis

Strengths



Well-diversified business model with high market share across segments for

2W/3W automotive components

Consistent track record of organic and inorganic growth

Strong customer relationships with various OEMs

Growing and profitable European business with high entry barriers

Strong financials metrics and robust growth prospects

Weaknesses



Domestic business highly dependent on Bajaj Auto’s performance (~60% share

in standalone revenues)

Low share of business contribution from high margin after-market and export

segments

Opportunities



Increasing diversification of customer base and segments

Significant headroom for growth in India with capacity utilization at ~70%

Mix shift towards more complicated and value-added products to aid margin

improvement

Entry in 4W segment in India (including CV segment)

Opportunity to increase exports across product segments

Threats



Increase in competitive intensity, leading to pressure on pricing

Loss of market share of deeply entrenched customers (viz. Bajaj, Eicher, etc.)

Non-extension of technology tie-ups leading to end of technical assistance

16 December 2016

Endurance Technologies

Financials and Valuations

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

Raw Materials

Employees Cost

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY12

38,317

22.5

23,627

2,731

6,809

33,167

86.6

5,150

13.4

1,869

3,281

955

105

2,431

602

24.7

1,823

47.3

4.8

FY13

38,225

-0.2

23,998

2,964

6,336

33,298

87.1

4,927

12.9

1,873

3,053

929

284

2,408

-80

2,329

632

27.2

1,693

1,751

-3.9

4.6

FY14

42,119

10.2

26,383

3,340

6,988

36,711

87.2

5,408

12.8

2,078

3,330

810

285

2,805

-48

2,757

704

25.6

2,045

2,081

18.8

4.9

FY15

49,170

16.7

29,712

4,206

9,204

43,121

87.7

6,048

12.3

2,269

3,779

510

325

3,594

1,055

29.3

2,524

21.3

5.1

FY16

52,406

6.6

30,534

4,785

10,321

45,639

87.1

6,766

12.9

2,506

4,261

464

340

4,136

1,213

29.3

2,912

15.4

5.6

FY17E

57,271

9.3

32,850

5,433

11,404

49,687

86.8

7,585

13.2

2,930

4,655

386

373

4,642

1,339

28.8

3,303

13.4

5.8

FY18E

65,203

13.8

37,344

6,062

12,808

56,214

86.2

8,989

13.8

3,215

5,774

283

400

5,891

1,717

29.1

4,174

26.4

6.4

(INR Million)

FY19E

73,623

12.9

42,090

6,703

14,433

63,226

85.9

10,397

14.1

3,538

6,858

217

456

7,097

2,065

29.1

5,032

20.5

6.8

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Preference Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

FY12

198

5,899

6,097

9,830

16,022

22,008

11,210

10,798

1,150

567

10,839

2,228

6,110

1,466

1,034

7,336

6,351

688

298

3,503

16,022

FY13

193

7,164

7,357

9,556

16,932

23,410

12,766

10,645

1,168

316

11,178

2,247

6,207

1,502

1,222

6,457

5,419

679

359

4,722

16,932

FY14

193

9,612

9,805

114

7,056

-108

16,867

26,386

15,053

11,333

1,379

137

12,099

2,651

6,750

1,194

1,503

8,176

6,830

853

493

3,923

16,867

FY15

176

11,242

11,418

107

7,774

-208

19,091

29,895

16,476

13,419

1,108

216

12,882

3,858

5,795

936

2,293

8,545

6,666

1,063

816

4,338

19,091

FY16

176

14,380

14,556

8,295

-234

22,617

35,138

19,136

16,002

1,448

818

466

13,932

4,067

5,931

1,674

2,259

10,049

7,388

1,839

822

3,883

22,617

FY17E

1,407

16,134

17,541

7,295

-234

24,602

39,388

22,066

17,322

1,448

818

466

15,263

4,428

6,482

1,884

2,469

10,716

7,894

1,941

880

4,547

24,602

FY18E

1,407

19,705

21,112

5,595

-234

26,474

43,388

25,281

18,108

1,448

818

1,466

16,708

5,009

7,380

1,508

2,811

12,074

8,881

2,195

998

4,634

26,474

(INR Million)

FY19E

1,407

23,647

25,054

4,195

-234

29,015

47,888

28,819

19,069

1,448

818

1,966

19,204

5,634

8,333

2,063

3,174

13,490

9,917

2,453

1,120

5,714

29,015

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Total Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Appl. of Funds

E: MOSL Estimates

16 December 2016

Endurance Technologies

Financials and Valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY12

13.0

26.2

43.3

0.2

2.1

FY13

12.4

25.8

52.3

0.3

2.3

FY14

14.8

29.6

69.7

0.4

3.3

FY15

17.9

34.1

81.2

0.9

5.9

26.3

13.9

5.8

1.5

12.1

0.2

8.0

23.8

16.1

16.0

1.5

7.4

0.6

FY16

20.7

38.5

103.5

1.3

7.3

22.8

12.3

4.6

1.4

10.8

0.3

15.2

22.4

15.5

16.0

1.4

9.2

0.4

FY17E

23.5

44.3

124.7

1.9

9.6

24.1

12.8

4.5

1.5

11.2

0.3

11.0

20.6

15.0

16.1

1.4

12.6

0.3

FY18E

29.7

52.5

150.1

3.6

14.4

19.0

10.8

3.8

1.3

9.3

0.6

20.0

21.6

17.0

18.5

1.4

20.9

0.1

FY19E

35.8

60.9

178.1

6.4

21.7

15.8

9.3

3.2

1.1

7.8

1.1

23.5

21.8

18.5

20.8

1.5

32.4

0.0

20.6

35.4

16.6

17.9

1.5

3.4

1.4

0.1

10.4

26.0

14.8

15.3

1.7

3.3

1.1

0.1

23.4

24.2

15.9

16.3

1.5

4.1

0.6

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY12

2,431

1,869

955

-559

505

5,202

220

5,421

-2,524

2,897

-2,249

-1,385

-951

-22

-2,351

820

646

1,466

FY13

2,329

1,873

929

-676

-1,109

3,345

106

3,451

-1,983

1,467

-1,896

-424

-107

-947

-40

-1,518

1,466

1,502

FY14

2,805

2,078

810

-795

405

5,303

387

5,690

-2,403

3,287

-2,227

-2,897

-830

-43

-3,770

-308

1,502

1,195

FY15

3,594

2,269

510

-1,088

-847

4,438

-305

4,133

-3,001

1,132

-3,106

-17

-817

-524

-64

136

-1,285

-258

1,195

937

FY16

4,136

2,506

464

-1,050

270

6,327

521

6,848

-4,710

2,139

-456

-5,474

-15

-461

-296

136

-636

738

937

1,674

FY17E

4,642

2,930

-1,339

-455

5,791

-4,250

1,541

-3,877

-1,000

-386

-318

-1,704

210

1,674

1,884

(INR Million)

FY18E

5,891

3,215

-117

-1,717

-463

6,809

-4,000

2,809

-1,000

-4,600

-1,700

-283

-603

-2,586

-377

1,884

1,508

FY19E

7,097

3,538

-239

-2,065

-525

7,807

-4,500

3,307

-500

-4,544

-1,400

-217

-1,090

-2,707

555

1,508

2,063

16 December 2016

REPORT GALLERY

RECENT INITIATING COVERAGE REPORTS

Disclosures

This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company (ies) and/sector(s), if any, covered in the report and may

Technologies

Endurance

be distributed by it and/or

its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or

inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to

you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment

objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek

professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide

for future performance, future returns are not guaranteed and a loss of original capital may occur.

MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a some

companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or its affiliates are

seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may educate

investors on investments in such business . The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering,

applying and interpreting information. Our research professionals are paid on twin parameters of performance & profitability of MOSt.

MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally,

MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or

affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make

investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among other things, may give rise to real or potential

conflicts of interest. MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives

thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)

discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the

same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though

there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not

match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set of customers having various

objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from,

any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free

and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other

sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions provided by that third party either publicly or through a

subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the

document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons

that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in

the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation

the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or

for any necessary explanation of its contents.

Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any compensation

for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.

Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.

Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this

report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.

Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412

Pending Regulatory inspections against Motilal Oswal Securities Limited:

SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and

adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have requested

to SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection.

List of associate companies of Motilal Oswal Securities Limited -

Click here to access detailed report

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or

indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research

receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues

Disclosure of Interest Statement



Analyst ownership of the stock



Served as an officer, director or employee -

Endurance Technologies

A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or

which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures

Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412)

has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of

Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of

these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting

Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is

not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in

the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This

document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be

engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by

the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal

Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and

therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a

subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the

Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Varun Kumar

Varun.kumar@motilaloswal.com

Contact : (+65) 68189232

Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931

16 December 2016

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com

Motilal Oswal Securities Ltd