Government Steps & Healthy Monsoon Should Boost Volume: Endurance Technologies | CNBC TV18

Summary

The transcript highlights a detailed interview with Rajopal Shastri, CFO of a company focused on automotive and manufacturing. The discussion covers the company's positive outlook for the future, despite challenges in the European market due to geopolitical factors. Shastri shares insights into the company’s strong order book, strategic acquisitions (such as the 60% investment in Stepher), and expansion plans, including growth in the four-wheeler sector. The company remains optimistic, with expectations for both organic and inorganic growth, especially in electric vehicle-related products and braking systems, while continuing to focus on strong partnerships with major clients like Bajaj Auto.

Takeaways

• 😀 The company reported steady revenue growth in Q4 and has a healthy order book despite macroeconomic challenges.
• 😀 Nearly 25% of the company's revenue comes from European markets, which are facing geopolitical uncertainties and dropping volumes.
• 😀 The company's order book remains strong due to careful acquisitions and investments in capacity without increasing fixed costs.
• 😀 The company remains flexible to handle demand fluctuations across various powertrain types, including electric vehicles, plug-in hybrids, and internal combustion engines.
• 😀 The company's European operations are expected to grow, partly due to the acquisition of Stepher, a company with a healthy EBITDA margin and a significant presence in Germany.
• 😀 The 60% acquisition of Stepher is expected to drive significant growth in the coming years, with plans to acquire the remaining 40% within five years.
• 😀 The company is increasing its presence with OEMs in Europe through its acquisition of Stepher, offering both machined castings and the ability to build its own machines.
• 😀 On the braking front, the company has expanded its product offerings to include dual-channel anti-lock braking systems (ABS), currently being supplied to Royal Enfield and Bajaj Auto.
• 😀 The company is investing in backward integration in its braking systems, including manufacturing braided hoses, electronic control units, and plans to integrate battery management systems.
• 😀 The company is optimistic about growth in the upcoming year, projecting a revenue growth rate in the high single digits to low double digits due to favorable market conditions, including tax cuts and liquidity improvements.
• 😀 The company aims to achieve a 35% revenue share from four-wheelers by 2030, with a strong focus on organic and inorganic growth opportunities in the four-wheeler and European markets.

Q & A

What was the overall outlook for the company in the European market?

The company remains optimistic about the European market, despite macroeconomic challenges. They have a healthy order book, strong investments in capacity, and flexibility to handle varying demand, including for electric vehicles (EVs) and internal combustion (IC) vehicles.

How did the company's order book in Europe perform in the past year?

The company closed the previous year with approximately €305 million in revenue from European operations. They have a healthy order book with strong growth prospects, despite the drop in volumes in the market.

What are the key factors contributing to the company's success in Europe despite industry turmoil?

The company’s success can be attributed to its careful order acquisitions, investment in capacity without increasing fixed costs, and a diversified product offering that spans both electric and traditional vehicles.

How does the company's acquisition of Stepher impact its European business?

The acquisition of Stepher, a company with €80 million in revenue, will significantly enhance the company’s presence in Germany and provide synergies in machined castings and machine manufacturing. This is expected to lead to revenue growth and stronger positioning in the European market.

How does the company plan to expand its braking system business?

The company has been investing in both foundation and antelope braking systems, with a focus on expanding its product offerings to include dual-channel antelope braking systems for clients like Royal Enfield and Bajaj Auto. Additionally, backward integration strategies will improve cost advantages.

What is the company’s current order book size in India, excluding major clients like Bajaj?

The company’s order book in India is approximately ₹4,500 crores, with a significant portion expected to enter production in the current fiscal year. This figure excludes orders from Bajaj Auto, their largest client.

What new investments has the company made to drive future growth?

The company has made several new investments, including setting up an alloy plant and a four-wheeler casting plant. They have already secured ₹280 crores in orders for specialty electric vehicle castings and are entering the battery pack assembly business.

How does the company plan to address growth in the four-wheeler segment?

The company aims to grow its four-wheeler segment, both organically and inorganically, with a focus on expanding in the European market and achieving 35% of its total business from four-wheelers by 2030.

What is the company’s revenue growth target for the current fiscal year?

While the company refrains from providing explicit guidance, they are optimistic about achieving low-to-mid single-digit growth in revenue due to strong order books, new investments, and positive economic factors such as tax cuts and improved liquidity.

How did the company perform in terms of revenue growth and margin improvements in the previous year?

The company grew by 13% in revenue during the previous year and saw a 50 basis point improvement in margins. They expect FY26 to perform even better, leveraging their acquisitions and technological investments.