The brokerage has increased FY22E EPS by 8 per cent to factor in the recovery and new order wins.
Motilal Oswal has given a buy rating to Endurance Technologies with a target price of Rs 1,065. The share price moved down by -4.68 per cent from its previous close of Rs 895.90. The stock’s last traded price is Rs 854.
According to the brokerage, Endurance Tech’s 4QFY20 performance miss was mainly due to the Covid-19 led lockdown. Miss in EU revenues and higher other expenses in India led to miss at adjusted PAT level. The company continues to outperform the underlying 2-wheeler industry and this gap should widen further due to new customers and content increase. EU subsidiaries also continued to outperform the underlying EU PV industry. The brokerage has cut its FY21E EPS by 4 per cent to factor in the near-term weakness in the 2-wheeler industry. However, the brokerage has increased FY22E EPS by 8 per cent to factor in the recovery and new order wins.
Investment Rationale
According to the brokerage, production ramp-up at 50-55 per cent in Jun-20; Jul’20 should see a much bigger increase. It is expected to reach pre-Covid levels in the third quarter of FY21. New business wins in India stood at Rs 5.86 billion in FY20; 50 per cent of the orders should be executed starting the second quarter of FY21. Further, Rs 12.8 billion worth RFQs (request for quotation) is under discussion; the conversion rate is usually 50 per cent.
The stock trades at 28.1 times /20.2 times at FY21/FY22E consolidated EPS. The brokerage is increasing its target multiple to 23 times (from 20 times v/s 5-year average of 30 times) to reflect the early recovery cycle.
Source: Motilal Oswal Financials
For the quarter ended March 31, 2019, the company reported consolidated sales of Rs 1640.53 crore, down -7.38 per cent from last quarter sales of Rs 1771.26 crore and down -9.51 per cent from last year's same quarter sales of Rs 1812.98 crore. The company reported net profit after tax of Rs 124.04 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 75 per cent stake in the company as of March 2020, while FIIs held 16.34 per cent, DIIs 7.36 per cent and public & others 1.3 per cent.
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