Endurance Technologies Ltd (CN)

NSE:ENDURANCE

Earnings Call Analysis

Endurance Technologies Q2 FY24 Key Financials

Endurance Technologies reported robust financials for Q2 FY24. Their consolidated profit after tax (PAT) grew by a remarkable 17.5%, reaching INR 1,545.55 million. Indian operations contributed 77% to the total income, reflective of a 3.8% increase to INR 19,842.97 million, while European operations accounted for the remaining 23%. The stand-alone EBITDA margin stood firm at 13%. Endurance aims to be profitable by Q4 FY24, with an expectation for two-wheeler industry sales to reach 20.5 to 21 million units. New business wins and requests for quotations signal strong growth potential for the company, leading to an anticipated peak in business by FY26, with a specific focus on suspension, castings, braking systems, and electric vehicles.

Financial Highlights and Future Outlook of Endurance Technologies in Q2 FY '24

Endurance Technologies charted a robust financial performance in the second quarter of the fiscal year 2023-24, despite a slight contraction in the Indian two-wheeler market, with scooter sales displaying minor growth of 1.13% and motorcycles experiencing a sharper decline of 4.1%. The overall automotive industry mirrored this downtrend slightly, marking a 0.2% decline. However, the European market revealed a contrasting trend with a significant 16.2% jump in passenger car sales, although this didn't directly translate into a similar surge in production, which only incremented by 3.7%.

Notable Financial Performance In The Earnings Report

The company saw its consolidated total net income increase by 8.1% year-over-year, rising from INR 23,690.6 million to INR 25,605.46 million. Notably, EBITDA followed suit with a 19.2% increase to reach INR 3,338.44 million, maintaining a margin of 13%. Moreover, profit after tax exhibited a stronger performance with a 17.5% increase, climbing from INR 1,314.94 million to INR 1,545.55 million, achieving a 6% margin. The growth in profit was bolstered by the inclusion of the INR 248.79 million income from the Maharashtra PSI scheme incentive.

Solid Financial Footing and Stand-alone Results

Endurance Technologies reported a healthy financial position with no consolidated net debt and a substantial net cash reserve of INR 4,561.62 million. The stand-alone financials posted a 3.8% gain in total income and an 8.6% increase in profit after tax, which was up to INR 1,425.4 million from INR 1,312.7 million during the same quarter of the previous fiscal year, pushing the PAT margin to 7.2%.

Optimistic Market Growth Projections and Business Wins

Amidst current challenges, management is optimistic about reaching two-wheeler sales numbers of 20.5 million to 21 million in the near future, driven by potential improvements in consumer sentiment and an uplift in premium bike and electric vehicle (EV) sales. With a dominant 77% of its consolidated income coming from Indian operations, including Maxwell, Endurance raked in new business amounting to INR 7,774 million from notable OEMs. This new business is expected to peak by FY '26. In the electric vehicle space, the company has secured contracts worth INR 6,194 million, attesting to its successful expansion in this burgeoning segment.

Expanding Portfolio and Projected Growth

Endurance's business strategy seems focused on diversifying with significant new business from various OEMs and a growing order book for four-wheelers, standing at INR 1,170 million primarily with Punch Powertrain and other major automobile brands. Their existing business win till date is valued at INR 36,640 million and is anticipated to achieve peak sales in FY '25 and FY '26. Moreover, contracts with TVS worth INR 5,278 million are forecasted to reach peak sales by FY '25.

Q2 Business Developments and International Ventures

The quarter saw new business wins including a significant TVS suspension business worth INR 266 million and other contracts totaling INR 7,774 million which are set to peak in FY '26. Additionally, the company is embarking on international initiatives such as starting the supply of air suspension front forks to KTM Austria by end of the year and a business value of INR 400 million per annum which will contribute to an estimated INR 2,100 million for KTM India and Europe in this financial year.

Investment in Technology and Infrastructure for Evolving Markets

Endurance has kept pace with technological innovation, with plans to start its BMS assembly surface-mounted technology line by February 2024. The expected annual peak business value for this line is INR 1,200 million. The company is also scaling up its production for electric scooter components, anticipating an annual volume of 240,000 sets for its aluminum castings used in EV battery packs and motor housing, further cementing its foothold in the expanding electric vehicle market.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day and welcome to the Q2 FY '24 Earnings Conference Call of Endurance Technologies Limited, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rakesh Jain from Axis Capital Limited. Thank you. And over to you, Mr. Jain.

[Rakesh Jain, analyst]

Thank you, Michel. Good morning, everyone, and welcome to the Q2 FY '24 Post-results Conference Call of Endurance Technologies. From the management team, we have with us Mr. Anurang Jain, Managing Director, Endurance; Mr. Ramesh Gehaney, director and CEO (sic) [ COO ]; Mr. Massimo Venuti, director and CEO, Endurance Overseas; and Mr. Satrajit Ray, director and Group CFO; and Mr. Raj Mundra, Treasurer and Head, Investor Relations. I will now request Mr. Jain to begin with his opening remarks, post which we will have the Q&A session. Over to you, sir.

[Anurang Jain, executive]

Thank you, Rakesh. And good morning to everyone. I would like to share details of how we have done in the second quarter of the financial year 2023, '24. In India, in the second quarter of FY '24, as per the SIAM data, the two-wheeler industry sales degrew by 2.4% compared to quarter 2 of the previous financial year. Scooters grew by [ 1.13% ] and motorcycles degrew by 4.1%. The automotive industry in India had a degrowth of 0.2%. In our overseas operations, in quarter 2 of this financial year, the EU and U.K. market saw an increase of 16.2% in the volume of passenger cars sold, though the production of passenger cars growth was only at 3.7%. Our European sales in value grew by 10.1% in euro terms. I will now brief you on the financials of the second quarter of FY '24. During quarter 2 of this financial year, as compared to previous year's same quarter, our consolidated total net income grew by 8.1% from INR 23,690.6 million to [ INR 25,605.46 million ]. Consolidated EBITDA grew by 19.2% from INR 2,800.2 million to [ INR 3,338.44 million ]. Consolidated EBITDA margin was at 13%. The profit after tax grew by 17.5% from INR 1,314.94 million in quarter 2 FY '23 to INR 1,545.55 million in quarter 2 of FY '24 and was at 6%. We have included the income of [ Maharash ] PSI scheme incentive of INR 248.79 million. The consolidated financials included the Endurance Overseas total income of INR 5,650.69 million. EBITDA was at INR 835.19 million, which was at [ 14.8% ]. And PAT was at INR 229.38 million, at 4.1%. The consolidated financial also included the Maxwell total income of INR 171.27 million; EBITDA loss of INR 43.28 million, which was at 25.3%; and the profit after-tax loss of INR 64.2 million, which was at [ 37.48% ]. At Maxwell, Endurance team is fully focused on lowering the [ bought-out ] component cost and the fixed and variable costs, along with the increase in total income, to be profitable from FY '25 onwards. And we hope to be profitable in the quarter -- of quarter 4 of FY '24. There was no consolidated net debt, and the company had a positive net cash of INR 4,561.62 million. During quarter 2, our stand-alone total income grew by 3.8% from INR 19,113 million to INR 19,842.97 million. Stand-alone EBITDA grew by 8.7% from INR 2,377.4 million to INR 2,584.35 million, with an EBITDA margin of 13%. Stand-alone profit after tax grew by 8.6% from INR 1,312.7 million in quarter 2 FY '23 to [ INR 1,425.4 million ] in quarter 2 FY '24, and the PAT was at 7.2%. We have included the income of [ Maharash ] PSI scheme incentive of INR 248.79 million. I would like to inform all of you that, the Indian OEMs in FY '24, as far as the two-wheeler sales were concerned, they were at 24.5 million, which was in FY '19. In FY '23, the two-wheeler sales were at 19.5 million numbers. And this year, we hope that the two-wheeler numbers reach 20.5 million to 21 million. We expect the consumer sentiment to improve in the long run with stabilization on the geopolitical front, economic well-being percolating down to the rural areas and with high increase in sales of premium bikes and EV scooters and EV three-wheelers. The detailed financials are available with the stock exchanges and on the Endurance website. I would like to share certain key points on the second quarter of FY '24. Our -- 77% of our consolidated total income, including other income, came from Indian operations, which included Maxwell. And the balance 23% came from our European operations. In India, till date in FY '24, INR 7,774 million of new business was won from OEMs other than Bajaj Auto, which included Royal Enfield, TVS, Hero MotoCorp, Tata Motors, HMSI, Jaguar Land Rover, Mahindra & Mahindra, Punch Powertrain and Suzuki. This business win of INR 7,774 million constitutes INR 4,663 million of new business, about 60%; and INR 3,110 million of replacement business. This INR 7,774 million of business will reach its peak in FY '26. The total four-wheeler business win till date in this year is INR 1,170 million. The orders are mainly from Punch Powertrain, which is a JV between the [indiscernible] group and Stellantis; Tata Motors; Mahindra; and Jaguar Land Rover. I would like to mention that we have INR 19,160 million worth of requests for quotes from OEMs. Since FY '20 in India, INR 36,640 million of business has been won other than Bajaj Auto, out of which INR 25,710 million is new business and INR 10,930 million is replacement business. The INR 36,640 million new business will reach peak sales in the years -- FY '25 and FY '26; and is mainly for suspension, castings and braking systems. TVS business win has been INR 5,278 million and is growing. The business won is for brake systems, aluminum casting, suspension and [ ride shock ]. This INR 5,278 million sales will reach peak in the next financial year of FY '25. The total business win for electric vehicles till date is INR 6,194 million in the stand-alone business. These orders are mainly from Ather Energy, Bajaj Auto, Hero Electric, Greaves electric, Bounce and Aptiv. The new business won in quarter 2 of this financial year is as follows: TVS, which is INR 266 million inverted front fork and rear monoshock suspension business; [indiscernible] brakes business for the new platform of INR 115 million; Suzuki new scooter front fork business of INR 253 million. This is in addition to the INR 1,400 million front fork business already won, and the SOP will be in quarter 2 of FY '25. HMSI EV casting business win of [ INR 40 million ] at our Vallam plant. This is in addition to the front fork suspension business won for HMSI's first EV scooter earlier in this financial year. The new 35-dia air suspension front forks for supply to KTM Austria will start by end of this year with the help of KTM technology from our Waluj, Aurangabad plant. The value of the business will be INR 400 million per annum and will be exported to KTM Austria. The suspension business to both KTM India and Europe should touch INR 2,100 million in this financial year. Our BMS assembly surface-mounted technology line will start operations from February 2024 at our Waluj, Aurangabad plant. The peak business value will be INR 1,200 million per annum for the battery management system as well as the ABS ECU, which we should reach in the next financial year of FY '25. For EV scooters, we are ramping up our volumes to 240,000 sets per annum for 8 parts of EV battery pack and motor housing aluminum castings. The total value to start with will be INR 1,000 million per annum, which has already started and will reach peak in the next year of FY '25. For our aluminum forging business, we are increasing the capacity from 280,000 parts per annum to 600,000 parts per annum [ and ] additional business value of INR 800 million from our Waluj, Aurangabad plant. This business has started and will reach peak value in FY '25. We have added Jaguar Land Rover as a new client for EV passenger cars, with an export business value of INR 240 million. Aluminum forging is becoming a new opportunity for growth for both the ICE and the EV -- vehicles. At our Chakan plant, we are installing machines for structural aluminum casting like swing arms, subframes and structural fairings both for EV and ICE models which are going in for lightweighting for Bajaj Auto, KTM, [ Peugeot ] and TVS. This business has already started in this year and will peak in next financial year of FY '25. Our customers recognize us as a trusted and capable partner in the value chain in terms of both technical and financial strengths. As I mentioned earlier, the electronic vehicles market continues to offer significant opportunity for growth to the [ auto ] components sector. Endurance has taken a major step forward to harness this opportunity by executing a share subscription and purchase agreement for acquiring 100% of equity share capital of Maxwell Energy Systems in a phased manner. We have recently increased our equity stake to 56% in Maxwell, as per our agreement. Maxwell is in the business of advanced electronics, particularly in the battery management systems for two-wheeler EVs and automotive and two-wheeler battery packs. At Maxwell, we have won BMS business of [ INR 1,290 million ] in FY '23 and INR 883 million till date in this financial year and have a pipeline of RFQs for INR 810 million. Till date since FY '22, INR 3,743 million business has been won by Maxwell, which is expected to fully realize in financial year '26. With the current order book, order pipeline and technical strengths between Endurance and Maxwell, we are confident of achieving our goals in the advanced electronics space. As disc brake assembly business is growing with addition of Bajaj, TVS, Royal Enfield, Yamaha, Hero MotoCorp, Ather and HMSI new business, our second plant at Waluj, Aurangabad has already been set up for this increase in volumes and has started operations. We will also start disc brake assembly supplies to Hero MotoCorp from March 2024 and HMSI from November 2024. With this new plant, our disc brake assembly capacity has increased to 6.2 million numbers per annum, and brake discs to 8.1 million numbers per annum. The supply of two-wheeler ABS assemblies to Bajaj Auto and Royal Enfield has started. We have reached a run rate of 400,000 ABS assemblies per annum. As you may be aware, competition is mainly from [ Bosch ] and Continental, which controls -- which control the major market share in the Indian ABS two-wheeler market. We are in the process of supplying a dual-channel ABS from quarter 4 of this financial year. And we have scaled up additional assembly lines by increasing further to 40,000 ABS assemblies per annum, which will take our capacity to 640,000 ABS assemblies per annum. We are further planning to increase volumes [ to ] 1.2 million single- and dual-channel ABS assemblies per annum by the end of 2025. We have, in March '23, started manufacturing the ABS valves, which is not only a technology component but is helping us in substantially lowering our costs. Due to increased orders from Bajaj, Yamaha India, TVS and Hero Electric and now Royal Enfield, we have added a new plant, in July '22, at Chakan to help increase supplies to [ 4.5 million ] wheels per annum. With our new order wins now from Royal Enfield and TVS, we are now expanding to supply 5.5 million wheels per annum from April 2024 onwards. As far as Europe is concerned, in FY '24, we have a EUR 19.76 million business, mainly from 2 leading German OEMs and from a French-Italian group which manufactures passenger cars and commercial vehicles. In the first 9 months of 2023, the EU market has seen a battery EV penetration of 15% against 12% and 9% in the previous 2 years. Out of the EUR 104 million order we have won in the last 18 months, EUR 16 million orders are for this growing battery EV market. I would also like to point out that Endurance, both in India and Europe, is actively pursuing its focus on gaining access to new technologies and focusing on new product organic and inorganic growth.

In quarter 4 of FY '24, our aftermarket sales grew by 20.3% from INR 1,043.6 million in the previous year to INR 1,255.2 million in quarter 2 of FY '24. We're exporting aftermarket parts to 32 countries. Now we are adding Brazil, DR Congo and Cameroon as new countries, which will take it to 35 countries. Aftermarket sales growth is a large focus area for us, and we are targeting a good growth in this financial year. In quarter 2 of FY '24, the export sales for India's stand-alone business grew by 12.6% from INR 400.1 million in the previous year to [ INR 450.6 million ] in quarter 2 FY '24. The major sales growth came from machine casting sales to Ford motors in U.K. [indiscernible] including Case New Holland; and also from two-wheeler suspension exports for the KTM plants in Austria, China and Southeast Asia. On the environment front, I would especially like to mention that Endurance is striving to being carbon neutral in its plants by effective use of solar power [ and wind power ], creating carbon sinks by driving tree plantation and thereby creating dense forests and driving use of natural gas and LPG in place of electric power and furnace oil. As mentioned earlier, the use of furnace oil has been completely stopped at Endurance. We have achieved a carbon neutral percentage of 30% till date in FY '24, and our aspiration is to reach greater than 50% in the next 3 years. This has increased from [ 24.6% ] which we achieved in FY '23. We are also focusing in lowering hazardous waste generation to achieve 0 waste to landfill. At Endurance, it will be a continuous endeavor to grow through organic and inorganic growth with a focus on technology upgradation; quality improvement; cost; and environment, health and safety. We will do our best to fulfill our stakeholder expectations by following the 5 values of customer centricity, integrity, transparency, teamwork and innovation. We at Endurance have a very positive outlook based on our large new business wins in the last 4 years, including for electric vehicles both in India and Europe. With these opening remarks, I would like to invite questions from all of you. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

[Jinesh Gandhi, analyst]

Mr. Jain, a couple of questions from my side. One is on the order intake both for India EV business and European side as well. We have seen some bit of sluggishness in order intake for EVs in India and likewise for Europe business as well. Any thoughts on that? Is there any seasonality involved over here? Or how do we see that?

[Anurang Jain, executive]

So see, I'll talk about India. And then Massimo Venuti can speak about the overseas EV market, how it is shaping up. So as you are aware -- I mentioned that we have won INR 6,194 million of EV business, but as you know, there was -- the FAME II subsidy in India was largely, I would say, removed from, I think, 1st July 2023; and which did impact, I would say, the costs and the sales of the Indian EV market. And I know that most of the companies are working on seeing how they can value engineer their, I mean, EV vehicles. And I think it's a question of time, that it will get back on track, but of course, you have the -- but you have various OEMs which are increasing now the EV sales for both scooters and as well as three-wheelers. And we are a part of this journey because we can see the increase which is going to take place. So as far as, I think, the EV market is concerned -- I mean it's only a postponement of the sales [indiscernible] as far as [indiscernible] Venuti to speak.

[Massimo Venuti, executive]

Yes. Speaking about Europe: We [ acquired ] in the second quarter -- [ first and the second ] quarter of the financial year, EUR 20 million. 94% of these business are in the electric field. For sure, in this moment, the electric is going down due to the fact that, starting from the 1st of September 2023, a lot of countries stopped the incentive, but please consider that, if I see the registration from January to September 2023 in the European market, [ that ] reached 14.8%, plus 8.2% of [ project wins ]. And so it means that, today in the first 9 months of 2023, the share of market of electric was 23%. And so everybody, the OEM are investing in this field. For sure, in this moment, we need support from the government because the [ leverage of price ] of this car is higher compared to the internal combustion engine technologies, but everybody are investing in this direction. And so it's only a question of time and infrastructure and so on, but I -- continues to be optimist because, in the last period of time, we never acquired business in the internal combustion engine. And so everybody are investing in the electric. For this reason, I am pretty sure that, in the next months, the situation could change.

[Jinesh Gandhi, analyst]

Okay. Massimo, my question actually was on overall order intake. I mean, last year, if I remember it correctly, we did close to about EUR 80 million of order intake. First half was about EUR 20 million. So are you seeing any slowdown in demand also reflecting in order intakes? Or this is -- this can be pretty volatile due to various factors.

[Massimo Venuti, executive]

So frankly speaking, the answer is yes because, in the last period of time, you have to consider that, even if it's not official because the GDP -- or there was a reduction in terms of forecast for this financial year and also for 2024, but officially we are in recession. This is the real situation in Europe. Because we can't compare the performance in the industrial market with the registration because, in this moment, everybody are reducing [ in important way ] the stock to the dealer. Only to give you an idea: We finalize the registration. Compared Q1, Q2 compared to Q1, we have had a reduction of 10%, but we finalized productions. There was a reduction of 18.7%. And if I analyze the quarter, the second quarter of this financial year, despite an increase of 16.2% in terms of registration, the production go up only 3.7%. So for sure, in this moment, there is a reduction in volume into the market, but this is due to the general situation on inflation, interest costs, if we consider that 90% of the car are financed. And with leverage of interests from 10% to 15%, the people prefer to postpone the purchase. So this is the situation.

[Jinesh Gandhi, analyst]

Okay. And in terms -- is this reflected in the production schedules which you get from customers for next 12 months? Is it lower than what we have seen in last 12 months production schedules?

[Massimo Venuti, executive]

Yes, absolutely yes. If you consider the -- as I told you, [ we are at ] 18.7% compared to the previous quarter. Only 3.7% in this quarter, but we finalize the year-to-date, for sure, is negative. We don't consider that we are comparing the data from 2022 because, if you compare these, compare the [ pre-COVID ] situation, the reduction is 25% but in the same situation in the registration, more or less, 20%, 22%, year-to-date in first and second quarter compared to [ pre-COVID ] situation. So the number of volume are completely different, [ compared to the past ], in this moment.

[Jinesh Gandhi, analyst]

Got it, got it. And last question is on...

[Operator]

Mr. Gandhi, I'm sorry to interrupt, sir. I will request you to kindly rejoin the queue for follow-ups.

[Jinesh Gandhi, analyst]

[ Sure ]. I'll come back.

[Operator]

[Operator Instructions] We'll take the next question from the line of Arvind Sharma from Citibank.

[Arvind Sharma, analyst]

Sir, the first question would be on your broader demand outlook in both India and Europe. Massimo did allude to it in his comments just now, but if you see on a broader perspective for the second half both for India two-wheelers and European passenger cars, what's the outlook?

[Anurang Jain, executive]

See, what I would say is that what we are seeing is, I think, rural -- the rural demand is what we feel is going to improve. The sense we are getting from the customer is the volumes will increase on the two- and three-wheelers. Three-wheelers is, anyway, a very good year, for I think all the people, including Bajaj Auto and [ Peugeot ]. What we are seeing is a huge increase then on the high-end bike sales. I mean that's really increasing, which is 150 cc or higher. We are seeing a big increase there. EV scooters, we are seeing an increase now. And EV three-wheelers, we are seeing an increase now.

[Unknown Executive]

[ New models ].

[Anurang Jain, executive]

Okay. And also there are many new models which we have entered, like Harley-Davidson, Triumph. These are seeing very big increases and very fast increases, so we are quite confident. And plus, we have also won a lot of new orders for EVs, which have been postponed because of the FAME II subsidy, which I think in this quarter, next quarter, will start coming in and start increasing.

[Massimo Venuti, executive]

Okay...

[Arvind Sharma, analyst]

If -- yes, Massimo on the European front as well, please.

[Massimo Venuti, executive]

Yes. So it's very difficult to speak about the future because, in this moment, the market or the sentiment of the people is not very positive and reflect the -- in some way the reduction of the GDP not only in Europe but also in United States. I can tell you one thing. Despite of an increase of 3.7% in terms of production in this quarter [indiscernible] we have been able to come up with an increase of 10% [indiscernible]. So this is due to the fact that we are starting with a lot of new projects. And for this reason, I am pretty optimist that we can manage the situation in the next 2 quarter, but for sure, the forecast is not positive.

[Arvind Sharma, analyst]

The other, second question would be the normal figures that you share on revenue and EBITDA for the European operations in euro terms.

[Massimo Venuti, executive]

Yes, for sure. So in the second quarter of this financial year, Endurance Overseas closed with EUR 16.2 million of turnover, compared [ 57 ] of the previous financial year, with an increase of [ EUR 5.10 million ], 10.1%. In terms of EBITDA, we closed with EUR 9.3 million, compared EUR 6.6 million of the previous financial year, with an increase of 41.7%. EBITDA for the second quarter reached 14.8% in percentage compared to 11.5% of the previous financial year. In terms of net result, we closed with EUR 2.5 million, 4%, compared EUR 1.7 million, 2.9%, of the previous financial year, with an increase of 53% compared to the previous financial year.

[Arvind Sharma, analyst]

Great. And sir, if I may just ask a follow-up on what Mr. Jain said about the higher-end bikes. And I mean including Triumph, Harley-Davidson as well as the recently launched Himalayan by Royal Enfield. Sir, like, last time you shared a bit on the expected production numbers. Is it possible to share them now?

[Anurang Jain, executive]

No. Actually I will not be able to share it because I was not supposed to share it. So if you remember the figures, that's your good luck, but I'm not supposed to share these numbers. But I can only tell you that it's growing fast.

[Arvind Sharma, analyst]

And sir, I believe the content per bike would be fairly high in all the 3 models.

[Anurang Jain, executive]

Yes. I think I did mention that. I think it was 28,000 for the Triumph. The Chetak was about, I think, 10,000 or 12,000. And Harley-Davidson was -- I'll just have to tell you. I don't have the figures right now. In fact, during the sessions, I will get back to you on that. So -- but these are all 10,000, 12,000. But Triumph is very high. It says 28,000.

[Unknown Executive]

Chetak and Harley was 10,000, and Triumph 28,000.

[Anurang Jain, executive]

Yes. And Triumph is, yes, yes, yes, 28,000. Chetak was 10,000 and Harley is also 10,000. Harley is 10,000. Chetak is 10,000. And 28,000 is Triumph.

[Operator]

The next question is from the line of Rohit Khatri from Mirae Asset Capital Markets.

[Rohit Khatri, analyst]

My question was mainly on the aluminum content. So the difference between aluminum content [ and ] EV and ICE: We had mentioned that the weight is slightly lower and the value is expected to be around 5% lower. Has anything changed with respect to this?

[Anurang Jain, executive]

No. And I think, look, it remains the same, but I think what I mentioned is that value -- in fact, let me just get out that sheet. What I remember, the value add is higher in both, the value add. In -- so the value add is more -- let me see if I can find it, but I'll get back to you on that. I'll get back to you.

[Rohit Khatri, analyst]

And honestly, why I asked is mainly because one of the publicly available report talks about a substantial increase in aluminum content. It talks about around 30% to 50% kind of increase, so I'm just trying to add both these things...

[Anurang Jain, executive]

So I would not say 30% to 50% increase but definitely looking at more parts, which are more type of parts which are being now used. Like I mentioned, instead of [ prime ] cases and covers, cylinder heads, cylinder blocks, now what we see is battery housings upper and lower, case transmissions left and right, motor housing then -- so you have a lot of castings which are lower in weight, but the value add is higher.

[Rohit Khatri, analyst]

Okay, okay, sir. And how much would that be, around -- any percentage down?

[Anurang Jain, executive]

The -- okay, I'll just need to find that paper because I have the actual -- okay, this, I'll need to get back to you, yes -- so yes. I can tell you that, if I had to compare the figures -- this is already a statement, I think. See, what we are seeing is because -- see, there were about, say, 7 parts in, say, a ICE two-wheeler versus 9 parts in a electric two-wheeler. The parts are different, like I told you. So instead of the [ prime ] cases, cover cylinders -- of cylinder heads, you have the battery housing. You have the [ base ] MCO, terminal [ pace ], terminal parts, terminal -- [ because many motor ] -- so many other castings. So here what I'm finding is the value add is actually much higher. And the weight is slightly higher because you have 9 casting versus 7, but it's not 30% to 50% because it is lightweighting. Because it's an EV, the castings have to be lightweighted. So they cannot be heavier, but the value add is much, much higher, the value add in terms of value.

[Operator]

[Operator Instructions] The next question is from the line of Amit Hiranandani from SMIFS Limited.

[Amit Hiranandani, analyst]

Sir, 25% of the consolidated revenue comes from the suspension business, so how do you intend to grow this piece of business in the mid- to long run, please?

[Anurang Jain, executive]

See, what is happening is that I'd -- first, if I look at the normal front forks and rear shock absorbers: We have got a very large order from Suzuki for their scooters, which is starting in, I think, second quarter, about July, August 2024. That's a very large order of almost, I think, 175 crores a year. Now this is coming in, in a big way. We are also in fact increasing our inverted front fork volumes. Like I said, this year, we should do about [ 2 crores and 10 crores ]. I will not give you a figure, but these volumes are increasing every year both for India because -- KTM, Bajaj; as well as for KTM in Austria; and the other countries, in China and Southeast Asia. So that is one increase which will happen. Also what we are finding is that items like inverted front forks are now being used...

[Unknown Executive]

[indiscernible]...

[Anurang Jain, executive]

In the higher-end ultrabikes. So we have value engineered that front fork and now -- but the pricing is, of course, as you know, much better compared to a normal front fork. So that is also, I think -- and these volumes are increasing. I think it will reach peak in quarter 4 of this financial year. So we are finding -- one is how the technology components are being used in the lower-end bikes, not just the KTMs but high-end Pulsars. We are finding inverted front forks and monoshocks very high-end business going up; new businesses of Suzuki, for example. And of course, I think there has been upgradation of products across all the OEMs. That will also increase our business because we already have about 40% to 42% of the Indian market. So the question is we can grow in value and maybe the share of business.

[Amit Hiranandani, analyst]

And sir, this 40% to 42% Indian market share, is it this -- is it in FY '23, right? And what was the share in FY '18, FY '19?

[Anurang Jain, executive]

FY '18, FY '19, that figure, I don't have it offhand, but it was lower. I can just tell you it was lower. It has been increasing every year. That, I can assure you, but I don't know the figure. I don't have the figure right now, but we can get back to you through, I mean, Axis, see -- and get back to you with the figures.

[Amit Hiranandani, analyst]

Sir, my second question is basically you have been winning new orders for the EV suspension as well, so is the realization and margin profile higher in the EV side?

[Anurang Jain, executive]

I will just leave it at that, that it's good, because growth is good. And we are going to get -- in fact, I'm going to tell you one more area where we are increasing the suspension is on the EV [indiscernible] will tell you that. EVs is really going to grow. As the EV scooters grow, you will see -- and the EV three-wheelers grow, you will see a lot of increase in suspension because we are in all the major platforms for EVs.

[Amit Hiranandani, analyst]

And sir, is Endurance paying any royalty to KTM for suspension know-how?

[Anurang Jain, executive]

No.

[Amit Hiranandani, analyst]

No, okay, all right, sir.

[Operator]

The next question is from the line of Aashin from Equirus Securities.

[Aashin Modi, analyst]

Sir, my first question is on the India business margin side. So if we see ex of subsidy, our margins have remained in that 10%, 11% sort of number in the last 4 or 5 quarters, so how do we see margins going on from here onwards? I mean, is it operating leverage or product mix which would drive improvement in margins in the stand-alone India business?

[Anurang Jain, executive]

Yes, yes, yes, sure. See, first, I'll tell you -- because we always compare the previous year to this year. That's the way we work, okay? Now if you look at the margins in the first 6 months, okay -- and this, I'm talking about Endurance which is consolidated. Total income has increased by 12% to 50,271 million. EBITDA has increased in the first half -- this is first half, [ okay, so ] first half of last year -- by 28.1%, which has gone up from 5,245 million to [ 6,770 million ], 28.1%. The PBT has increased by 37%, which is 3,077 million to 4,215 million. And the profit after tax has increased from 2,349 million to 3,181 million, which is 35.4%, so if you see, we are -- in fact, our profits, I've always said it, from 2016, are growing much higher than our sales, yes, 28%, 37%, 35%. So the margins are increasing. Now if I, if we'll remove the mega projects incentive, because that differs from -- in the first 2 quarters. In fact, there was -- the mega project was only 240 million in quarter 2 versus...

[Unknown Executive]

[ 340 million ] almost...

[Anurang Jain, executive]

Almost -- about 340 million in quarter 1. Now let's compare the figures, which I would say quarter 2 to quarter 2 without the mega project because that's additional income. Now if you see without, our EBITDA margin percentage has gone from 11.1% last year to 11.9%. It's plus 0.8% (sic) [ 0.8 percentage points ]. PAT percentage has gone up from 5.8 to 6.3. This is stand-alone India I'm talking about, okay? Okay. So even if I take with mega project incentive, the margins have gone from 12.4% to 13% and PAT has gone up from 6.9% to 7.2%. So we are always focusing in this challenging situation where you have EV coming in -- then do you have obstacles? So we are not able to meet full realizations on EVs. Also you have to see that we -- I mean our major OEMs, how they are doing. How is the industry doing? Quarter 2 has been tough compared to quarter 1 because the two-wheeler industry has fallen. Especially, motorcycles has gone down. 3 of our major OEMs have degrown in spite of that 3.8% growth which is there. This 3.8% growth also includes the lowering of the RMC parts, where I think we have lost about 57 crores -- not lost, I would say. 57 crores has been the impact on sales, so that 3.8% is net of...

[Unknown Executive]

[ Of that ] impact...

[Anurang Jain, executive]

Of this impact of INR 570 million. So what I'm trying to say is that I think these figures need to be analyzed. As far as we are concerned, very -- we are very highly focused on profitable growth. If you have to compare quarter 1 to quarter 1 and by quarter 1 to quarter 2, you will see a lower growth this year because our growth was very high in quarter 1. I mean [ look mostly India ]. If I take without mega projects incentive, of course, our growth was [ 13.3% ], but the EBITDA margin went up by almost [ 40% ]. PAT went up by 80%, I mean, so you have to look at -- when we go by quarter -- see. That's why I give you half 1 figures this year versus last year, because I have to compare how Endurance has done over last year without meta projects incentive because that's, I mean, extra income. So I feel we're on the right track. We can do much better. Now looking at the future, our focus will always be in growing the margins like we have done in the first 6 months. We will keep growing. Of course, it depends upon how -- the order wins which we have won, how they move in the next few quarters, but definitely we are improving from quarter to quarter. So I hope I've been able to explain it.

[Aashin Modi, analyst]

Sure, sir, sure. Sir, second question was regarding the profitability in the Hero business. So sequentially there was some drop in margins over there as well, so is it something related to seasonality? Or is there something to read into it?

[Anurang Jain, executive]

So I'll request Massimo to speak, but I think it's to do with drop in volumes, I think, but he can speak. Massimo?

[Massimo Venuti, executive]

Yes, I'm here. So thinking about the profitability, if I just dig in. There is a reduction compared to the previous quarter due to the fact that we have had a reduction of volume. So if you see the turnover in the second quarter, it's been EUR 62.8 million compared to EUR 68.8 million in the previous quarter, with a reduction 9%. The EBITDA go down to 14.8%, compared 16.1%, only for the reduction of volume in the turnover. If you analyze the year-to-date compared to the previous year, we are closing with 15.5% of EBITDA, compared 12.6%. Please consider that we continues -- to analyze the figures compared to the previous year, but you -- see, I know that you are -- you see the profitability of Endurance Overseas in 2018, in 2019 and 2020, but we are speaking about a different world in terms of volume, unfortunately because, in this moment, we are doing minus 30%. The market is doing minus 30%. In 2018, the total market reached 13 million of vehicles. We closed the previous financial year with 9.5 million. Probably this year will be more or less the same. And so unfortunately, the EBITDA, for sure, is affected by the reduction of volume, but I believe that 15.5% of EBITDA is not so bad in our field, considering also that we -- for sure, we're having the same problem of the previous financial year in the energy cost, but compared 2019, 2020, we are paying 3x gas energy. And this is -- means more or less 2% of EBITDA, only in this field, so...

[Anurang Jain, executive]

And see. My request is please look at first half of last year versus first half of this year. So what Massimo is saying, 15.5% EBITDA margin, is actually first half versus first half. And that is the way you should see because, quarter to quarter, things can differ. It's last year versus this year. I would also like to mention that our consolidated financials includes Maxwell. Maxwell is a very strategic call we have taken to be a part of the EV journey. Look. There will be some hurdles always along the way, but we are very confident that we are on the right part of the journey. And we are very confident that we will have positive results because, Endurance, we believe in profitable growth. And this is going to happen. It's a product mix issue which will be resolved from quarter 4. It will start happening from then, and hopefully, next financial year will be good. So what I'm trying to say is that everything should be seen in light of what exactly Endurance is doing. And we are very confident about Maxwell because of their technology, the kind of new order wins. We'll tell you next time sort of which are the new or the new, I mean, order wins we are getting, what opportunities we are getting. So we are quite excited about Maxwell, to be honest, but it takes time. EV is still a very emerging market in India. We will do well. We have -- we will take some pain in the first couple of years, but things will improve.

[Operator]

The next question is from the line of Shirish Guthe from HDFC Life Insurance.

[Shirish Guthe, analyst]

I hope I'm audible.

[Anurang Jain, executive]

Yes.

[Shirish Guthe, analyst]

Sir, I want to understand generally. Like we are seeing a lot of growth opportunities coming for other ancillaries from the aluminum casting exports and non-auto exports, so any progress that we have made? If you could highlight, that will be helpful, sir.

[Anurang Jain, executive]

See. Actually, die casting, as you know, Endurance is a leader. And it's a -- not only because of capacity and capability and technology and process but a lot of experience. And trust me: We are getting a lot of opportunities both for exports as well as in India. The question is what we choose. Right now our focus is on four-wheeler in a large way and on machine castings. And we are looking at definitely EV as well as structural casting because of lightweighting. So this is a focus we are doing. Exports, of course, is a major focus. And we are working on how to increase the export business, but Europe has its challenges because the number of vehicles sold are less. Like it's at 20% less compared to 2018. So those challenges are there, but we are definitely focusing on the Indian four-wheeler market in a large way. That is growing, like I mentioned in the past quarter con calls. So I mean that's what I would like to say.

[Shirish Guthe, analyst]

But just wanted to understand this export opportunity. Is that going to be meaningful for you guys? Or are these coming at better margins, or no? I mean, anything specifics you can share?

[Anurang Jain, executive]

No. Definitely they are coming at better margins. The question, what happens, is whether the volume order that's per the LOI we get is sustained or not. So we did have an issue in this year where the volumes were less than what was to have been taken. And that, we can understand because the volumes are less than what they had estimated. So I would say that whatever the exports are happening, the four-wheeler focus which we are -- happening in India are definitely at good margins. And they have better margins. That's for sure because, see, our focus is -- why I'm saying about machine casting, structural castings, EV casting, because there the margins are good. So we have to focus where the margins are good. I don't want to do any more raw castings, [ though ], because you don't make that much money. So the focus will be always for machine castings, for four-wheeler castings, for lightweighted structural castings, EV castings, so that's where we are headed, including for exports.

[Shirish Guthe, analyst]

Okay, sir. And sir, if it's possible -- this is the last question. If it is possible, can you share the breakup within casting? How much is four-wheeler? And how do you see that playing out in there?

[Anurang Jain, executive]

I cannot share the breakup, but I can say that four-wheeler in general is higher. I can tell you that. It is higher, especially when you talk about commercial vehicles. It's the highest in passenger cars, and then you have the two- and three-wheelers. So that, I can tell you.

[Operator]

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

[Jinesh Gandhi, analyst]

Sir, just one clarification on incentives. We talked about incentives for 2Q is expected to be 34 crores, in last quarter. Was that understanding right? And does it mean that it has come to 24 crores...

[Anurang Jain, executive]

No, no, no...

[Satrajit Ray, executive]

[indiscernible].

[Anurang Jain, executive]

I'll request Mr. Ray to answer that.

[Satrajit Ray, executive]

I'll clarify that. See, the way we book incentives, it goes by how we apply and how government sanctions and pays us the incentives, so the amount that was an estimate which was mentioned last time was not supposed to entirely come in quarter 2. So based on our -- if you see, we've been booking roughly around 59 crores, 58 crores every year, roughly, okay, in the last 2, 3 years. So this year, based on our sales appetite, that means GST-bearing sales in the State of Maharashtra, we booked 34 crores in quarter 1 and 24.8 crores in quarter 2. In case -- the balance amount of 10% that belongs to earlier years, in case such amounts get cleared during quarter 4, then there's expectation of more incentive coming in, but that is not certain at this point in time. So it was said in that perspective.

[Jinesh Gandhi, analyst]

Got it, got it. And the second question pertains to as an extension of Shirish's question on aluminum die casting. So on the aluminum die casting side, given where we are in terms of our journey and the order wins which we have, over next 2 to 3 years, how big can EVs and non-autos be as a percentage of aluminum business? Given that we have done a good amount of work and orders have come in, how big this, the -- EVs and non-autos can be over the next 3 years for aluminum die casting business?

[Anurang Jain, executive]

See. What I can say is the growth will be high, but where the growth will lead us to as a percentage, I don't know. But if you talk about the values: The values can definitely double in the next 3 to 4 years, and that's the focus, so the question is that -- see. What is happening is, because we are -- I can say we are a technology leader in all the products we make for two- and three-wheelers or even for four-wheelers, on castings. There's a lot of upgradation which is happening. There's a lot of value engineering which is happening. We are trying to see how to improve profit margins, so I think it will depend. And definitely we are taking profitable opportunities. We are not growing sales just to grow sales. We have to see -- the margins have to increase. That's why -- again without mega project incentive, figures of the first half of last year versus in this year. You should also take into account that Maxwell is a very strategic call taken. If you see [indiscernible] first half is 13.6% in India. It's 13.6%, so -- but -- and that can be explained. So what I'm trying to say is look at it from the -- by going into details to, I mean, analyze the business and the financials at Endurance.

[Jinesh Gandhi, analyst]

Got it. And on the EV side, I believe we have won some orders from Tata Motors [ really ] on the aluminum die casting side. So is the content there materially higher vis-à-vis, say, what we supply to Hyundai, Kia or M&M, of ICE versus EV, on the aluminum die casting?

[Anurang Jain, executive]

I do not know the content per vehicle. The way we track, I mean, two-wheelers and three-wheelers, I don't know what is the content per vehicle, but definitely the order wins are increasing for Hyundai, Kia and Tata Motors and now Mahindra. Mahindra is coming in, in a much bigger way. We've just -- we are going to start [indiscernible] for them also. So the order wins are quite good. The question is that all these OEMs should respect the LOI volumes. Because [ what I give you pieces are ] based on the LOIs what we get.

[Jinesh Gandhi, analyst]

Great. Sure. And the last question is on -- again on the aluminum die casting. So clearly with that focus on [ building ] machine components, where are we in that journey today, say, vis-à-vis 2 years back? And based on the orders on hand, where should we be in 2 to 3 years time for the machine die casted components?

[Anurang Jain, executive]

Machine castings, whether semifinished or finished, is at 70% in India, approximately. Our focus is to take it to 100%. We don't want to do raw castings, but there are some understandings with, I mean, our old OEM customers. But we are trying to change that in the future, even if it's semifinished machining, because the value add is much better. So that 30% needs to be converted to with machining.

[Operator]

[Operator Instructions] Ladies and gentlemen, I now hand the conference over to the management for closing comments. Over to you, sir.

[Anurang Jain, executive]

And no, I have no further comments. I just want to thank all the people who attended and joined the call. Thank you for the time. Thank you.

[Operator]

Thank you, members of the management. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.