Aggressive Capacity Growth Will Erode Margins Amid Global EV Pressures

Key Takeaways

• Aggressive diversification into new technologies and markets increases investment risk, straining cash flow and returns amid uncertain payoffs and tough competition.
  
• Shifting industry trends and changing customer priorities threaten legacy business streams, while regulatory and supply chain pressures jeopardize future revenue and margin stability.
  
• Diversification into high-margin EV, premium export, and non-auto segments, plus advanced manufacturing investments, positions Endurance for sustained revenue growth, profitability, and sector resilience.

Catalysts

Manufactures and supplies automotive components for original equipment manufacturers in India and internationally.

• Endurance Technologies' sustained heavy investment in new capacity, automation, and R&D for battery packs, four-wheeler components, and non-automotive segments reflects a major pivot with long gestation periods and uncertain payoff, especially as the company expands aggressively into markets and technologies outside its traditional strengths. This could result in depressed free cash flow and lower return on invested capital over the next several years, impacting bottom-line growth.
  
• The company's historic concentration in the Indian two-wheeler segment leaves it highly vulnerable to a secular decline in overall vehicle ownership and traditional component demand as consumer preferences shift toward shared mobility and as EV adoption rises, especially given that new business wins in emerging areas may not fully offset the medium
• to long-term erosion of revenues from legacy segments.
  
• Endurance's ambitious push into EV battery packs and embedded electronics exposes it to intense competition from established global battery manufacturers and new entrants with advanced technology, increasing the risk of margin erosion and market share loss even as the upfront integration, supply chain and IP-related expenses further weigh on earnings.
  
• Additional regulatory burdens and global sustainability mandates may accelerate the need for costly technology upgrades and manufacturing transformation; this continual, mandatory reinvestment will pressure operating margins as the industry transitions more rapidly to advanced, lightweight, emission-compliant components.
  
• With OEM customers increasingly prioritizing localization and vertical integration of their supply chains, Endurance faces a structural threat of OEMs internalizing critical component manufacturing. This could shrink the addressable third-party supplier market over time and undermine revenue growth expectations from both the automotive and newly targeted non-auto segments.

Endurance Technologies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Endurance Technologies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Endurance Technologies's revenue will grow by 12.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 7.2% today to 8.4% in 3 years time.
• The bearish analysts expect earnings to reach ₹13.6 billion (and earnings per share of ₹96.35) by about July 2028, up from ₹8.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 31.3x on those 2028 earnings, down from 44.1x today. This future PE is lower than the current PE for the IN Auto Components industry at 31.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.85%, as per the Simply Wall St company report.

Endurance Technologies Future Earnings Per Share Growth

Risks

• Strong long-term demand for electric vehicle and renewable energy components is driving significant new order wins for Endurance Technologies, including contracts in both automotive (e-scooters, four-wheelers) and non-auto sectors, which suggests that revenue growth will be sustained as EV adoption accelerates globally and in India.
  
• The company is executing well on diversification beyond the two-wheeler segment, with multiple large export orders from premium U.S. and European OEMs for critical EV castings-and these are high-margin businesses that should improve profitability and earnings growth over time.
  
• Heavy investments in new automated manufacturing, R&D, and product expansion into high-value-added segments such as lithium-ion battery packs, anti-lock braking, and 4-wheeler suspensions position the company to benefit from industry trends toward lightweighting, advanced safety, and electrification, which could drive higher net margins.
  
• Endurance's expansion into non-automotive sectors, such as solar panel dampers (with expectations to reach ₹500-1000 crore business within 2-3 years), suggests additional resilience and alternative revenue streams that can support overall earnings in case of automotive sector cyclicality.
  
• Robust order pipelines, confirmed SOP (start of production) schedules, and a shift in product mix toward advanced, technology-intensive offerings-combined with state incentives and increasing operational efficiencies-are likely to support top-line growth and protect or enhance EBITDA and profit after tax in the medium to long term.

Valuation

• The assumed bearish price target for Endurance Technologies is ₹2050.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Endurance Technologies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹3275.0, and the most bearish reporting a price target of just ₹2050.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₹162.3 billion, earnings will come to ₹13.6 billion, and it would be trading on a PE ratio of 31.3x, assuming you use a discount rate of 13.9%.
• Given the current share price of ₹2623.2, the bearish analyst price target of ₹2050.0 is 28.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.