ET Intelligence Group: Endurance Technologies has an edge over rival suppliers of two-wheeler parts – and that has more to with fatter margins and increasing wallet share in what is a rather tough year for the industry. And this might well be the best time to buy into Endurance, which is trading at a 15 per cent premium to the BSE Auto index compared with an average of 64 per cent since its 2016 listing.
Local revenue fell 10 per cent in September 2019, while industry volume fell 15 per cent in the same period. It has been able to outperform industry growth thanks to increasing orders from new automakers, 10 per cent YoY growth in the replacement market, and increasing content per vehicle with its existing customers. So, operating profit margin expanded 200 basis points to 15.2 per cent for domestic operations.
It supplies disc brakes, disc brake assembly, shock absorbers, front forks and cylinder blocks to twowheeler makers. The Aurangabad-based company has been a key supplier to Bajaj Auto and Royal Enfield in the past. It is now gradually ramping up sales to Hero MotoCorp, Honda Motorcycle and Scooter, and TVS Motor.
Sales volume to Hero MotoCorp grew in double digits for the company in the September quarter. Endurance is ramping up the front fork set supply to 6,200 sets per day from 2,700 currently for Hero’s Halol plant. Likewise, the Karnataka plant has started supplying front forks to HMSI in September, and it is likely to reach 3,500 sets per day by February 2020. It will supply components to TVS from its new Karnataka plant. The company got orders from TVS for disc brake assemblies for Apache in the last fiscal, with revenue potential of Rs 40 crore.
The formula of higher wallet share from new customers is working in the overseas business, too. It supplies aluminium die-casting components to carmakers. This business accounts for 27 per cent of the total revenue. The company has increased its share of business from Volkswagen in Europe, and it is the largest contributor to revenue after Fiat Chrysler. Revenue rose 27 per cent from VW in the September quarter, while overall revenue from the overseas business fell 7 per cent in the same period.
The share of VW in Endurance’s overseas revenue rose to 29.2 per cent in the September quarter and overtook Chrysler’s for the first time.
Source: Ashutosh Shyam, ET Bureau