ENDURANCE - Endurance Technologies Limited Share Price

Management provided an optimistic outlook during the Q4 FY25 earnings call, contextualizing the performance against a backdrop of India's economic resilience despite global challenges. The GDP growth for FY25 is projected at 6.5%, down from 9.2% in the prior year. The automotive sector sees positive signs, notably with two-wheeler sales anticipated to meet pre-COVID levels, driven by decreased EMIs and government support for electric vehicles. Notably, total income for Endurance Technologies during Q4 FY25 increased by 8.4% year-on-year.

Key forward-looking points highlighted by management include:

1. Electric Vehicle (EV) Strategy: A new lithium-ion battery pack manufacturing facility near Pune has been initiated to cater to the growing EV market. An order worth Rs. 3 billion per annum has been secured for an e-scooter.

2. Maxwell Energy Acquisition: Total shares acquired stand at 61.5%, with plans to gain full control, enhancing Endurance's capabilities in battery management systems.

3. Expansion in Europe: The acquisition of Stöferle completed, aiming to leverage enhanced manufacturing capacity and consolidate growth in European markets.

4. Incentive Program: Receipt of an eligibility certificate for Rs. 6.06 billion under the Maharashtra PSI 2019 scheme, topping the prior scheme's Rs. 4.46 billion.

5. Operational Excellence: The new G45 R&D facility aims to advance suspension technology, driving growth in the four-wheeler sector.

Financially, standalone total income reached Rs. 89.1 billion for FY25, a growth of 12.5%, with a consolidated profit after tax of Rs. 8.36 billion. Continuing investments in infrastructure and product innovation are set to augment future earnings potential, evidenced by an order book of Rs. 2.75 billion in the newly established AURIC Shendra plant. The management's focus on electric and electronic business segments is underscored as critical for achieving sustainable growth.

Here are the major questions and answers from the Q&A section of the earnings transcript:

1. Question: Can you throw some more light on the Lithium-Ion battery pack assembly and the Rs. 3 billion order win? Answer: I won't disclose margin specifics, but we did secure a Rs. 3 billion order from a leading 2-wheeler EV OEM. This order represents significant growth potential across various sectors, including telecom and energy storage systems, leveraging our proprietary battery management systems developed in-house.

2. Question: Can you provide more details about the Rs. 300 crore order from Valeo and others? Answer: Valeo and two unnamed leading global OEMs are orders primarily for EVs, including critical casting components. While some products will supply Mahindra, others will be exported, highlighting our capacity for specialized components that cater to higher-margin markets.

3. Question: Any updates on the 4-wheeler suspension technical tie-up? Answer: We're engaged with leading OEMs and are progressing with plant audits. The collaboration has generated excitement among manufacturers, and we anticipate timelines for commercializing various projects between 8-12 months, with expectations for substantial orders.

4. Question: What is the growth outlook for the European business, especially post-Stöferle acquisition? Answer: Despite market challenges, we anticipate growth in our European division, bolstered by the Stöferle acquisition, which brings in approximately €80 million to our revenue. Recent wins and solid performance position us well for future growth, aiming to exceed industry projections.

5. Question: On the PSI incentives, will the Rs. 870 million be spread evenly across quarters? Answer: We booked Rs. 38 crores in Q4 due to receiving our eligibility certificate from the 2019 scheme. Annual eligibility aligns with our GST payments, which suggests a consistent quarterly distribution, variable primarily by production metrics affecting the first half of the year.

6. Question: Are we facing potential tariff implications that could affect sales? Answer: Directly, we don't anticipate impact in India, but for Europe, I recognize possible indirect effects from duties on products delivered to premium U.S. cars, possibly affecting our European sales by approximately €20 to €30 million.

7. Question: What sort of CAPEX should we expect for FY 26? Answer: We plan substantial CAPEX in FY 26, building on previous investments in growth projects. Many initiates are maturing, and we expect this to drive improved revenues and margins over the next fiscal year based on solid order flow.

8. Question: Can you elaborate on the new alloy wheel plant and its strategic importance? Answer: We aim for margins that align with our overall corporate goals, enhanced by automation. Our strategic approach to securing orders acknowledges competitive pressures, and we foresee stable margins driven by operational efficiencies and strong relationships with our customers.