Endurance Technologies’ acquisition of Maxwell Energy paves way for the auto ancillary company to enter the fast-growing electric vehicles (EV) segment. This should allay investors’ concerns over Endurance’s lack of EV exposure until now. Maxwell, a subsidiary of UK based Ion Energy provides a battery management system for EVs.
Aurangabad headquartered Endurance will pay 51% of the total consideration of Rs 310 crore upfront while the rest will be paid as a variable annual pay-out dependent on the financial performance between FY23 and FY27. Maxwell has been focused on designing and developing advanced electronics targeting mobility and energy storage solutions. Its revenue is expected to increase two-fold to Rs 40 crore in FY23 from the previous year. It has a cumulative order book of Rs 150 crore from the domestic and export markets. A large chunk of the order book is from India’s leading two-wheeler EV makers.
Despite its small size, Maxwell’s acquisition is a good fit for Endurance. The latter will set up a separate R&D lab in Chakan to develop more products with the help of Maxwell in the segments of telematics, high voltage battery management systems for four-wheelers and commercial vehicles, and embedded electronics.
This would expand the addressable market for Endurance. It won orders worth Rs 740 crore in the past fiscal year. Currently, it has received inquiries worth Rs 2,080 crore from various automakers.
Despite lower two-wheeler volume in the domestic market, the revenue of Endurance grew by 15% to Rs 7,459 crore on account of higher realisation following price revision, market share gain in alloy wheels, and brakes, and ramp up in volume of ABS to two-wheeler makers. India accounts for 72% of the company’s total revenue, while the balance is from European operations.
The company has started ABS supplies to Bajaj Auto and Royal Enfield. It expects to reach the peak annual capacity of four lakh units by September 2022. The company is the only supplier of the entire assembly with ABS units in India. Given the company’s plans to expand existing capacities of discs and brakes, and new product launches, analysts expect FY23 revenue to grow by nearly 20% with a margin expansion of 800 basis points.
The stock has lost nearly 23% since the beginning of January 2022. It trades at 25 times one year forward earnings, compared with the long-term average of 28 times. The valuation discount may narrow given the company’s bright prospects.