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    IPO watch: Endurance Tech a good bet on strong prospects

    Synopsis

    ETL, which is a key supplier to Bajaj Auto, Royal Enfield and European carmaker Fiat, is commanding attractive relative valuation at the higher end of its issue price compared its peers.

    ET Bureau
    ET Intelligence Group: Auto component manufacturer Endurance Technologies' initial public offer (IPO) could be an attractive proposition for investors.

    Endurance Technologies (ETL), which is a key supplier to Bajaj Auto, Royal Enfield and European carmaker Fiat, is commanding attractive relative valuation at the higher end of its issue price compared its peers.

    Two factors point to how well the company has handled its operations.Firstly, it turned around its operations well after the global financial crisis by focusing on profitability, cost efficiency , increasing market share.This gave ETL healthy return ratios.Secondly, the company plans to increase content per vehicle.

    ETL supplies aluminium die castings, suspensions and transmission and braking systems to two-wheeler and four-wheeler companies, a n d each segment accounts for 62.8%, 23.3%, 5.5% and 4.6%, respectively .

    The company's domestic operations are largely focused on two-wheelers. In domestic operations, the company's biggest custom er is Bajaj Auto. In Europe, ETL supplies components to Fiat and Daimler. Its European operations generate superior margins.

    The company's revenues have grown at a CAGR of 8.2% in the past four years to Rs 5,274 crore. Net profit grew at a CAGR of 12.4% to Rs 291 crore in the same period mainly due to lower interest cost. Its operating margin has been steady in the range of 12.913.7% over the last five fiscals.

    At Rs 472, it is commanding a valuation of 16.5x FY18 earnings versus its peers which are trading in the 10-33x range. The company can trade higher than the industry average, considering its growth prospects, focus on profitability and strong RoE profile.

    Ahead of the issue, it has raised Rs 348.5 crore from 24 anchor investors, the company said. It allotted 73.8 lakh shares to anchor investors at the upper end of the price band. Smallcap World Fund picked up the highest amount of shares at 12.91%.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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