Endurance Technologies stock price touched a new 52-week high on January 5, 2023. The company is a leading global automotive components manufacturer with diversified product base including aluminium die castings, transmissions, braking systems and suspension products. Endurance Technologies is coming out with its December Quarter 2023 results today. The stock price is up 24% over the past three months and 8% since January 24, 2024, after Bajaj Auto delivered stellar Q3FY24 results. Bajaj Auto stock price has also gained 8% since its December Quarter 2023 results.
Bajaj Auto is a major client of Endurance Technologies which contributes nearly 40% of its revenue mix. Thus, Endurance Technologies stock price movement is dependent on Bajaj Auto (BAL) performance. Investors keenly watch BAL’s wholesale volume numbers which indicate growth trajectory for Endurance Technologies revenue and profitability.
Bajaj Auto reported revenues of Rs 12,165 crore, an increase of 30% YoY in Q3FY24, aided by volume growth of 22% YoY. But what is highly soothing for the Endurance Technologies investors is Bajaj Auto’s roaring domestic business which has grown 50% YoY in revenue terms in Q3FY24. Speaking on domestic business, Dinesh Thapar, Chief Financial Officer at Bajaj Auto said, “Domestic motorcycles, our premium bikes business represented by KTM and Triumph, commercial vehicles, and electric 2-wheelers, all of them have grown in scale and registered double-digit growth.” He further added that BAL’s domestic motorcycle business has maintained a solid run growing twice as fast as the market and about 6x in the 125cc+ category driven by popular brand Pulsar. Motorcycles contributed nearly 70% of Endurance Technologies standalone income (domestic business) in H1FY24. And two-wheelers (motorcycles and scooters) account for about 80% of total standalone income.
Endurance Technologies standalone income constituted 76% of total consolidated income in H1FY24 followed by European operations contributing the remaining 24%. As an auto ancillary company, Endurance Technologies growth prospects are directly proportional to production and sales volumes of customers which includes Bajaj Auto, HMSI, Royal Enfield, TVS Motors, Mercedes, Hyundai and Tata Motors. While Bajaj Auto is on a robust volume growth path, other two-wheeler manufacturers are not far behind. But their contribution to Endurance Technologies income pie remains in single digits.
Strong order wins in Q2FY24, suspension and die-casting business on a strong footing
Endurance Technologies witnessed strong order wins during Q2FY24. Starting with TVS Motors order of Rs 26.6 crore for inverted front fork and rear mono-shock suspension business. Another brakes business order of Rs 11.5 crore from Ather. Suzuki’s front fork order for Rs. 25.3 crore. A new 35 dia air suspension front forks order for supplying to KTM Austria with the business value of Rs 40 crore per annum. Suspension and die casting are two major product platforms which contributed 32% and 30% of total standalone income in Q2FY24. The company has received a very large order from Suzuki for front forks and rear shock absorbers (for two-wheelers) of Rs 175 crores a year. “We already have about 40% to 42% of the Indian front fork market”, said Anurang Jain, Managing Director at Endurance Technologies. He further added, “These volumes are increasing every year, both for India for KTM Bajaj, as well as for KTM Austria, and other countries in China and Southeast Asia. Premium parts like inverted front forks are now being used in the higher-end Pulsar bikes and also KTM.” For die casting, order wins are increasing for Hyundai, Kia and Tata Motors and Mahindra. Speaking on die casting business, Jain said, “We are going to start two oil sumps for them also. The point is that all OEMs should be able to generate the LOI volumes.”
Domestic market outlook positive, Europe remains muted
With respect to demand outlook, the domestic two-wheeler market is expected to remain positive supported by high-end bike sales of 150cc+ from Bajaj Auto and new models of Harley-Davidson, TVS Motor and Triumph. The company is also seeing a big increase in electric scooters and electric three-wheelers volumes. According to FADA, the upcoming general election is expected to stimulate spending in the two-wheeler category. Improved customer sentiment buoyed by factors like good crop prices, potential fuel price reductions, robust marriage season are expected to enhance demand. While the domestic market is expected to contribute strongly to topline and bottom-line in Q3FY34 for Endurance Technologies, Europe is not in a very positive frame as indicated by low auto production numbers. The European auto sector has been impacted by high interest rates. In Europe, 90% of the cars are financed with interest rates ranging from 10% to 15%. Due to this burden, customers are postponing their car purchases. Hopefully, the domestic market should fill the growth gap.
