Endurance Technologies reported consolidated EBITDA of `320 crore (+26% yoy) in 4QFY19, 18% above our estimatesmainly due to sharp improvement in gross margins and government incentives.
We maintain ‘sell’ rating as we believe near-term opportunities arising from stricter safety norms in India are already priced in. Revise fair value to `900 (from `925) on expensive valuations.
Endurance Technologies reported consolidated EBITDA of Rs 320 crore (+26% yoy) in 4QFY19, which was 18% above our estimates, led by (1) sharp improvement in gross margins due to a decline in commodity prices, (2) market share gains in India and Europe and (3) government incentives.
In this quarter, the company booked incentives of `315 mn received under the Maharashtra state government’s mega project scheme.
We did not include this in our estimates. Adjusted for government incentives, net profit came in at `1,281 million in 4QFY19, in line with our estimates. Adjusted for government incentives, consolidated EBITDA came in at `290 crore (+14% yoy), 6% above our estimates and adjusted EBITDA margin came in at 15.7% (+90 bps yoy and +170 bps qoq) against our estimate of 14.7% in 4QFY19.
Standalone revenues (excluding the government incentive) increased by 6% yoy (4% below estimates) in 4QFY19 mainly led by (1) 17% yoy revenue growth in Bajaj Auto, (2) market share gains in the domestic business and (3) strong growth in aftersales and exports segment partially offset by a decline in the production of Honda and Royal Enfield volumes. Adjusted EBITDA margin (excluding government incentives) came in at 13.5% in 4QFY19. Improvement in EBTIDA margin was led by lower commodity cost and a richer product mix.