The upcoming IPO of Endurance Technologies, which opens today for subscription, has received positive recommendation from analysts at JainMatrix Investments. In its report, which is available in PDF format later in this article, the Bangalore-based research house notes that the IPO’s pricing and valuations are reasonable. Terming the company a high stamina player in the auto ancillary space, the report put a Subscribe rating on the IPO, classifying it as a medium risk, high return type of offering. The report also mentions that Endurance Technologies IPO GMP is currently in the range of INR60-65 per share.
Here are the key points of the report:
- ETech has a consistent track record of organic and inorganic growth. It has strong customer relationships with high quality OEMs in India and Europe.
- ETech offers products in 4 broad segments which helps to expand customers relationships.
- ETech has strong R&D and technological capabilities. ETech has invested in high-quality testing equipment, software, human resources, in its R&D centers for each of their product segments.
- The balance sheet looks healthy with good cash/share and fair debt.
- The firm is led by a team with good experience in the auto component industry. The MD has been in the industry since 1985. The next line of management has experience in their respective areas, and have been with ETech for over 5 years. Executive compensation is high but fair compared to profits.
- The firm has successfully executed a large overseas acquisition in Europe and gained customer access to some reputed OEMs and has a fast growing and profitable European business.
Overall opinion about Endurance Technologies IPO
- Indian auto ancillary mfg. is a high potential space with ample domestic demand and global opportunities. India has many competitive & comparative advantages in this sector. Two wheelers and small cars R&D and manufacture will shift here with many global players already present.
- ETech has a significant size, steadily improving margins and marquee customers. It has a healthy balance sheet indicating conservative financials. It has good Indian and global presence.
- It is not a well-known firm, but with this IPO it may emerge among the leading firms in the segment.
- Current equity market conditions are positive for IPOs, and auto-ancillaries is a good sector.
- At a FY16 PE of 22.8 times, valuations appear right and leave something on the table for investors.
- The negatives include sector high competition, cyclical business and currency & global business risks.
Investment rationale: Overall, we feel that ETech is a good offering and may be a high stamina player in the auto ancilliary space. As an investment, the ETech IPO is rated a medium risk, high return type of offering. Investors can go ahead and BUY this ETech IPO with a 1 year perspective.
Several other brokerage houses have also come out with their recommendations and analyst views are largely positive for the IPO. Readers can access a snapshot view of these broker recommendations on this page while IPO Central’s analysis of the IPO is available here. Endurance Technologies IPO GMP is currently more than 10% of the offer price and this indicates to a strong possibility of listing gains.