Endurance Optimistic on ABS Growth, Energy Pass-Through

Endurance Technologies Limited — Q4 FY26 Earnings Call (15 May 2026)

1. Overall Tone of Management: Optimistic

• Management repeatedly emphasizes growth visibility and execution momentum (e.g., “growth can be 100% to 150%” for ABS; “we are quite confident” on pass-through; “best quarter… in the history” for Europe).
• Even while acknowledging macro/war-driven cost volatility, they frame it as manageable via customer discussions and operational optimization (“we are managing the situation”; “assertively pursuing all the OEMs”).

2. Key Themes from Management Commentary

• Macro volatility driving input-cost pressure (Middle East/shipping/energy): volatility in energy/logistics impacting raw materials and gas/oil costs; management stresses active customer engagement for conversion cost pass-through.
• India demand support: GST rationalization (Sep 2025) continues to support automotive demand; RBI repo cuts and stable inflation.
• Regulatory-driven growth in braking (ABS → disc/hydraulic/CBS optionality):
• ABS capacity expansion underway: +12 lakh units p.a., SOP expected Sep 2026.
• Dual-channel ABS SOP ramp: Bajaj Auto from June 2026, another program Q2 FY27.
• If industry shifts to hydraulic CBS, management claims addressable market expands (master cylinder + calipers + brake discs).
• Greenfield execution across multiple plants (timelines clustered in FY26/FY27):
• Chennai disc brake plant: civil work advanced; SOP July 2026 (Royal Enfield) and Q3 FY26 (other OEMs); capacity 3m disc brake assemblies + 4m discs.
• AURIC Shendra: new US EV OEM + JLR + Valeo/Yazaki programs; peak sales targeted by FY29; peak annual potential ₹513 cr.
• Battery pack near Pune: regulatory compliance completed; planned SOP week four of May 2026.
• Electronics scaling via Maxwell (BMS and beyond):
• Maxwell FY26 turnover ₹162 cr vs ₹70 cr in FY25; BMS supply volumes 350,000 units.
• New DC-DC converter order: SOP June 2026; pipeline RFQs > ₹300 cr for trucks and 2W.
• Suspension growth (inverted forks/mono shocks):
• Inverted front forks monthly sales target: 60k → 75k by Jun 2026 → 100k by end FY27.
• Capex posture: FY27 capex expected similar to FY26, with emphasis on automation and operating efficiency.
• Aftermarket strategy (India): mechanic loyalty program + AI-enabled platform to maximize secondary demand; ambitious growth goals to 2030.

3. Q&A Analysis

Theme A: Revenue/margin drivers & one-offs (standalone + Europe)

• Core questions
• Any one-time revenue impacts (price hikes, commodity effects) in standalone and Europe?
• How much did RMC/energy and other items affect margins?
• Management response
• Standalone: revenue/margin impacted by commodity inflation and lagged pass-through; RMC % rose (65.3% → 66.82%).
• Explicit quantification: ₹73.7 cr impact from aluminium alloy/steel treated as non-value-add; management states EBITDA margin would have been ~13.3% vs 12.6% excluding this.
• Europe: energy cost increases managed; Q4 EBITDA margin ~20.5%; best quarter historically.
• Red flags / evasiveness
• Some items are described as “WIP” (pass-through negotiations), implying timing uncertainty rather than fully locked economics.

Theme B: Energy/gas cost pass-through sustainability (India + Europe)

• Core questions
• Will energy/gas costs rise further? How is pass-through working?
• Sustainability of Europe margins given energy volatility?
• Management response
• India: dependence on gas reduced by switching plants/suppliers to furnace oil/diesel; main issue is cost increases and ability to pass them through OEMs (“not very easy… but we are assertively pursuing”).
• Europe: energy cost increase “more or less 5%” vs prior year; April “more or less under control”; margin sustainability tied to volume/production and fixed-cost leverage.
• Notable strength
• Europe margin explanation is operational: they attribute margin strength to production vs registrations and volume-driven fixed cost absorption.

Theme C: ABS ramp, capacity utilization, and revenue outlook

• Core questions
• Current ABS revenues/volumes; how to think about next year with dual-channel SOP?
• What happens if ABS regulation shifts to hydraulic CBS?
• Management response
• FY26 ABS: ~280,000 single-channel ABS; “this year we are doubling” and dual-channel line starting July implies growth of 100% to 150% vs last year.
• ABS line expansion (+12 lakh) is being executed even if final regs differ; management expects capacity not fully used initially but focuses on filling speed.
• If hydraulic CBS: management claims hydraulic braking addressable market increases and value is higher than ABS alone.
• Evasive/partial
• They avoid giving absolute revenue value for ABS (“I can’t give the value”).

Theme D: 4W revenue contribution and greenfield timelines

• Core questions
• 4W contribution stuck around ~6%—how will it evolve in 2–3 years?
• Timelines for greenfield facilities and US EV OEM/JLR start.
• Management response
• Plan to reach 10% soon; growth driven by AURIC Shendra, Chennai/Vallam, and proprietary businesses.
• Timelines:
  • AURIC Bidkin alloy wheels: already operational; peak by end Q3/begin Q4 FY26.
  • AURIC Shendra: SOP June 2026 (US EV OEM), July–Aug 2026 (JLR).
  • Battery pack SOP: week four of this month (May 2026).
  • Chennai brakes: July 2026 (Royal Enfield); others Q3.
• Credibility note
• They provide more specific SOP windows than earlier calls, but still rely on customer schedules.

Theme E: Maxwell margin impact and one-time provisions

• Core questions
• Any impact on Maxwell margin this quarter?
• Gross margin safety excluding one-time items?
• Management response
• One-time EBITDA impact: inventory provision ~₹6 cr due to failed resolution process for Hero Electric inventory.
• Gross margin “safe when we exclude” the provision.
• Strong/clear
• Quantified and clearly separated as one-time.

Theme F: Europe order book / Stöferle contribution

• Core questions
• Quantify Stöferle order book and sustainability of European margins.
• Management response
• Stöferle new business acquired in prior year: ~€7m (Magna/BMW).
• Stöferle run-rate at acquisition: €70–80m.
• Without Stöferle: Europe growth materially lower (they cite ~2% total increase excluding Stöferle in FY26 context).
• Partial
• They provide some orderbook quantification but not a full detailed bridge of orderbook → revenue conversion.

Theme G: Battery pack technology differentiation

• Core questions
• How novel is the wire-free battery pack? Any comparable players in India? OEM demand?
• Management response
• Differentiation: in-house IP, “wire-free” design, safety-focused busbar design, fully automatic line; patents referenced.
• They confirm they are supplying this solution to the specific OEM; they are also talking to other OEMs but solutions may differ.
• Potential red flag
• Claims of “nobody… can offer this kind of IP” are strong and not benchmarked with competitors.

4. Guidance / Outlook

Explicit guidance (quantitative)

• ABS growth: “growth can be 100% to 150% compared to last year” (dual-channel ramp).
• ABS capacity expansion: add 12 lakh units p.a.; SOP expected Sep 2026.
• Dual-channel ABS SOP timing:
• Bajaj Auto: June 2026
• Another program: Q2 FY27
• Chennai disc brake plant SOP:
• Royal Enfield: July 2026
• Other OEMs: Q3 FY26
• Capacity: 3m disc brake assemblies + 4m discs p.a.
• Battery pack SOP: planned week four of May 2026.
• AURIC Shendra SOP:
• US EV OEM: June 2026
• JLR: July–Aug 2026
• Peak annual potential: ₹513 cr; peak sales by FY29
• Suspension volume targets (inverted front forks):
• 60k/month → 75k/month by Jun 2026 → 100k/month by end FY27
• Capex: FY27 capex expected to be similar to FY26 (no new number given).

Implicit signals (qualitative)

• Pass-through confidence but timing risk: management is “quite confident” customers will be fair, yet repeatedly notes negotiations are “WIP” and cost increases are “very abnormal.”
• War/energy volatility likely persists into Q1 FY27: “Q1 will still be a bit volatile… much better numbers from Q2**.”
• Europe margin sustainability depends on volume: they emphasize production-driven fixed cost absorption and “if we maintain this level of volume.”

5. Standout Statements (directly revealing)

• ABS growth call: “growth can be 100% to 150% compared to last year.”
• Margin normalization expectation: “Q1 will still be a bit volatile… much better numbers from Q2.”
• Quantified non-value-add commodity impact: “₹73.7 crores… completely a non-value add… EBITDA margin… should have been 13.3% instead of 12.6%.”
• Europe margin framing: “if in Europe we have volume, we can make a lot of money with good profitability.”
• Battery pack SOP timing: “planning to start the SOP in week four of this month.”
• Maxwell one-time hit: inventory provision “₹6 crores” impacting EBITDA this quarter.
• Technology differentiation claim: “nobody in the industry currently can offer this kind of IP to the OEMs.”

6. Red Flags / Positive Signals

Red flags
– Pass-through uncertainty: conversion cost increases “not very easy” and still “WIP”; implies margin risk if OEM approvals lag.
– Strong claims without benchmarks: battery pack IP superiority and “nobody can offer” language is assertive.
– ABS revenue value withheld: they provide growth % but not absolute revenue, limiting validation.

Positive signals
– Clear quantification of margin bridge (₹73.7 cr non-value-add; EBITDA margin would be higher).
– Operational explanations for Europe margin (production vs registrations).
– Multiple SOP windows and capacity targets across plants—execution credibility is supported by specificity.
– One-time items clearly separated (Maxwell Hero Electric inventory provision).

7. Historical Comparison & Consistency Analysis (vs prior calls)

a. Change in Tone Over Time

• Current (Q4 FY26): more confident/optimistic on growth ramps (ABS +100% to +150%; multiple SOPs clustered; Europe “best quarter in history”).
• Prior (Q3 FY26, Feb 2026): tone was optimistic but more regulation-waiting (“awaiting final guidelines… hope clarified by end of this quarter”).
• Shift classification: More Optimistic
• More forward certainty on SOP timing and growth magnitude.
• Less emphasis on “awaiting clarity”; more emphasis on “line of sight” and execution.

b. Tracking Past Commitments vs Outcomes

• ABS dual-channel SOP timing
• Past (Q3 FY26, Feb 2026): dual-channel SOP “expected to start next month” (and later in the year).
• Current (Q4 FY26): dual-channel SOP now anchored: Bajaj Auto June 2026, another program Q2 FY27.
• Assessment: ⏳ Delayed / re-timed (from “next month” expectation to specific June/Q2 windows).
• AURIC Shendra peak/US-JLR SOP windows
• Past (Q3 FY26): SOP for UK and US OEMs “by Q2 of next financial year” and peak by FY29.
• Current: US EV OEM SOP June 2026, JLR July–Aug 2026; peak sales by FY29 reiterated.
• Assessment: ✅ On track / refined (timing more specific; no clear miss).
• Battery pack SOP
• Past (Q3 FY26): SOP “end of March 2026 or early April 2026” after validation/approvals.
• Current: SOP planned week four of May 2026.
• Assessment: ⏳ Delayed (March/early April → week four May).
• Europe order inflow stagnation concern
• Past (Q3 FY26): analysts asked about dwindling Europe order inflow; management attributed to difficult market and policy uncertainty.
• Current: Europe growth strong in FY26 and Q4, but management still cites energy/war volatility.
• Assessment: ✅ Improved execution, but narrative still depends on macro/energy management.

c. Narrative Shifts

• From “regulation clarity pending” → “execute regardless”:
• Earlier calls: ABS guideline clarity awaited.
• Current: expansion is being implemented “irrespective of final regulations” (if ABS vs hydraulic CBS).
• Battery pack story moved from “validation nearing completion” to “SOP week four of May”:
• Indicates a timeline slip but with more detailed compliance/testing progress.
• 4W growth narrative strengthened:
• Current: explicit target to reach 10% soon and multiple proprietary programs with SOP dates.

d. Consistency & Credibility Signals

• Medium credibility (improving, but with delays):
• Management provides more quantified bridges and clearer SOP windows now.
• However, battery pack SOP and ABS dual-channel timing show re-timing vs earlier “next month / end of March” language.
• They do acknowledge one-time issues (Maxwell provision), which supports credibility.

e. Evolution of Key Themes

• Demand/macro: consistently supportive India demand; Europe remains challenging.
• Margins: shift from “commodity/seasonality headwinds” (earlier) to “war-driven cost volatility but manageable,” with explicit margin bridge now.
• Expansion: continued multi-plant execution; emphasis on automation increases in current call.
• Regulation: ABS narrative becomes more flexible (ABS vs hydraulic CBS) rather than dependent on a single outcome.

f. Additional Insights (cross-period)

• War/energy risk appears to be transitioning from “temporary” to “structural volatility”:
• Current call frames energy cost as recurring (“everyday we face this kind of problem” in Europe discussion).
• Management is increasingly using “production vs registration” logic to defend Europe profitability—suggests they anticipate scrutiny on top-line vs margin drivers.