Endurance Tech: recovery in two-wheeler volumes to aid

Endurance Technologies Ltd – auto component manufacturer – expects a strong recovery in two-wheeler volumes from September 2022 onwards. The company also expects to outperform the two-wheeler industry on the back of increasing penetration in OEMs, ramping up relatively lower contribution businesses, adding more products.
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New Delhi: Endurance Technologies Ltd – auto component manufacturer – expects a strong recovery in two-wheeler volumes from September 2022 onwards. The company also expects to outperform the two-wheeler industry on the back of increasing penetration in OEMs, ramping up relatively lower contribution businesses, adding more products, and increasing focus on the four-wheeler market through organic and inorganic routes.
FY22 was the third consecutive year of decline for the two-wheeler. Industry volumes in FY22 were similar to FY12, implying a zero 10-year volume CAGR. Thus, according to analysts, replacement demand alone could potentially contribute 100% of current industry volumes. Also, the current two-wheeler penetration in India is 55%, which is also expected to rise.
The company also articulated its plan to expand product capabilities for electric vehicle components. It is looking to expand in areas like embedded electronics space, which also implies a foray into sub-segments with high entry barriers & tech-based differentiation. The company recently acquired Maxwell Energy to foray into the embedded electronics segment, with Battery Management System (BMS) as the flagship product.
The Europe business which contributes one-fourth of the total revenue was impacted due to lower car sales. However, going forward, commentaries from global automakers indicate gradual improvement in the supply chain from January 2023 onwards. The operational performance of its Europe operations has also been significantly impacted owing to steep commodity inflation. However, excluding the impact of higher energy and aluminum cost, margins have been in-line with the previous year. Endurance Tech has so far not been able to pass on high energy costs to its customers but indicated that negotiations for the same are ongoing.
For the India business, the company expects its margins to increase by 160 bps over FY22-24 on the back of declining commodity prices, cost-cutting initiatives, and operating leverage.
Year-to-date the share prices of Endurance Tech have declined 27% against a 3% decline in the Nifty Auto index and a 13% decline in the Indian benchmark – the nifty 50 index.
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