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Endurance Technologies Ltd (CN)
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Endurance Technologies Ltd (CN)
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Earnings Call Analysis

Q2-2025 Analysis
Endurance Technologies Ltd (CN)

Endurance Technologies reports significant growth and future expansion plans.

In Q2 FY25, Endurance Technologies showcased impressive growth with total income rising to INR 29.4 billion, up 14.8% year-on-year, and net profit reaching INR 2.03 billion, up 31.3%. Looking ahead, they plan to launch a new AURIC plant for aluminum die casting, expected to initiate sales by Q2 FY26. The company anticipates a robust revenue ramp-up, projecting around INR 23 billion growth for FY26. Notably, orders from electric vehicle segments are surging, indicating a promising future in that market. Their strong expansion in the alloy wheel segment reflects optimism, with a projected production increase from their new plant by September 2025.

Strong Financial Performance

In the second quarter of FY '25, Endurance Technologies reported an impressive performance with standalone total income growing 16.8% year-on-year to INR 23.2 billion. Consolidated income followed closely, rising by 14.8% to INR 29.4 billion. Net profits also soared, with standalone net profit increasing by 29.7% to INR 1.85 billion, while consolidated net profit climbed 31.3% to INR 2.03 billion. This significant growth in profit, which outpaced total income growth, indicates a robust margin expansion, signaling effective cost management and competitive pricing strategies.

Market Dynamics and Segment Insights

The company operates across various segments including 2-wheelers and 4-wheelers. Notably, Indian OEM sales of 2-wheelers increased by 13% year-on-year, with substantial growth in scooters and motorcycles at 17% and 11%, respectively. However, the passenger vehicle segment witnessed a slight decline by 1%. This disparity highlights a shift in market focus, particularly towards 2-wheelers, which is a strategic advantage for Endurance, given its strong presence in this category.

Expansion Plans and New Facilities

Endurance is making significant investments in new production facilities. The company has commenced construction of a new plant in the AURIC Shendra Industrial Area primarily for 4-wheeler and non-auto aluminum castings, which is set to begin operations in the second quarter of FY '26. Additionally, a new facility for manufacturing 2-wheeler alloy wheels, aimed to produce 4.5 million wheels per annum, is expected to launch in September 2025. These strategic expansions are expected to increase revenue and enhance market share in these segments.

Electric Vehicle Market Engagement

Endurance is actively participating in the growing electric vehicle (EV) market. In the second quarter, sales of components for electric 2-wheelers surged to INR 739 million, a substantial increase from INR 391 million a quarter prior. This showcases a Compound Annual Growth Rate (CAGR) of 236% over the past three and a half years, significantly outpacing the overall growth of the electric 2-wheeler industry, which recorded a CAGR of 147%. This progress positions Endurance favorably to capture market share as electrification in the automotive sector accelerates.

Operational Efficiency and Margin Outlook

Despite challenges such as rising raw material costs, which increased by 15.2%, and operating expenses that rose 19.6%, Endurance maintains an optimistic outlook on margin expansion. The company is implementing operational efficiencies and leveraging high-capacity utilization at its plants, particularly in the braking and suspension segments. Management indicated that margins are expected to benefit from improved product mixes and increased operational efficiencies, projecting continued growth in profitability.

Guidance and Future Projections

Looking ahead, Endurance anticipates a substantial revenue ramp-up, targeting around INR 23 billion in FY '26, driven by expansions in both the 2-wheeler and 4-wheeler segments. The company remains confident about meeting its business plan, supported by robust order intake and increased customer engagement in both domestic and international markets. Key products will include aluminum die castings and drivetrain components, catering to both traditional internal combustion vehicles and the evolving electric vehicle space.

Challenges and Competitive Landscape

While the overall automotive market faces headwinds, Endurance has demonstrated resilience by growing its market share amidst declining vehicle registrations in Europe and challenges posed by high energy prices. Continued focus on proprietary product development and strong customer relationships positions the company well to navigate industry fluctuations and competitive pressures, particularly as it expands its footprint in the EV segment.

Earnings Call Transcript

Earnings Call Transcript
2025-Q2

from 0
Operator

Ladies and gentlemen, good day, and welcome to the Endurance Technologies Limited Q2 FY '25 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishit Jalan from Axis Capital. Thank you, and over to you, sir.

N
Nishit Jalan
analyst

Thank you, Del. Good morning, everyone. Welcome to Q2 FY '25 Post Results Conference Call of Endurance Technologies. We are pleased to host the entire management team of Endurance. We have with us Mr. Anurang Jain, Managing Director; Mr. Massimo Venuti, Director and CEO, Endurance Overseas; Mr. Rajendra Abhange, Director and COO; Mr. Raja Gopal Sastry, Group CFO; and Mr. Raj Mundra, Treasurer and Investor Relations.

I'll hand over the call to Mr. Anurang Jain for his opening remarks, post which we can have the Q&A. Over to you, Anurang.

A
Anurang Jain
executive

Thanks a lot. Good morning to everyone. We thank you for joining us and appreciate your time and interest in our company. You may have seen from our financials that we had a fairly strong quarter 2. India is expected to post a GDP growth of over 7% in FY '25 on a strong base of 8.2% growth in FY '24. For Q2, Indian 2-wheeler numbers were strong, but 4-wheeler numbers both in India and Europe were not. The quarter 2 volumes sold by Indian OEMs rose 13% year-on-year for 2-wheelers with scooter growth at 17% and motorcycle growth at 11%. 3-wheeler sales grew by 5%. On the other hand, the commercial vehicle volumes fell 9% and passenger vehicle volumes saw a drop of 1%.

I would now like to highlight the progress on a few strategic and operational actions taken, which have a strong bearing on a short, medium and long-term performance. To begin with, I will explain our recent expansions taken up. We had mentioned that we are constructing a factory as in the AURIC Shendra Industrial Area focused on 4-wheeler and non-auto machine aluminum castings. The construction is progressing well. There is a very good interest from 4-wheeler OEMs both in domestic and export markets and a few non-auto plans. This is evident from the large quantum of customer prequalifications and request for quotes and our order intake. This progress makes us confident of meeting our business plan for the investment we are doing.

You would have also noted our recent announcement on the new factory to manufacture 2-wheeler alloy wheels is in the AURIC Bidkin Industrial Area. That is also in Aurangabad. We are particularly excited about this project due to the success of our alloy wheel plant in Chakan where we have seen profitable growth with volumes growing almost 5-fold in the last 5 years. This project will double our volumes from existing volumes at our Chakan alloy wheel plants. Moreover, with key learnings and targeted operational improvements, including automation and the new AURIC Bidkin factory, we are expecting a good profitable growth. It is important to note that only half of the 30-acre AURIC Bidkin industrial land will be used for this 2-wheeler alloy project, and the rest will give us headroom for expansion.

It is encouraging for us to see that automotive companies like Toyota, JSW and Ather Energy are setting up greenfield plants also at the AURIC Bidkin industrial area. I would like to mention that as far as the sales to electric vehicle 2-wheelers are concerned in quarter 2 of FY '25, it has almost doubled to INR 739 million in quarter 2 over quarter 1 of this financial year, which was at INR 391 million. Our CAGR growth in the last 3.5 years is 236% as compared to the electric 2-wheeler industry 3.5-year growth of 147%. This is as per the VAHAN data. This growth in our sales is across all our product segments, including suspension, aluminum castings, braking as well as alloy wheels.

I will now speak on some important operational topics. First, I would like to speak on suspensions. In the past, we have mentioned about some of our suspension plants not running to full capacity. With higher sales for anchor OEMs in these plants and fresh orders for other models from various OEMs, the capacity being used is rapidly increasing. And at our Sanand and Halol plant, it has been almost fully used. At Waluj, our plant's capacity is being fully used, and now we are further expanding to service a large suspension order for Suzuki scooters of INR 1,650 million annum.

The SOP is planned from January 2025. The best industry 4.0 tools are being deployed in these assembly lines. Last year, the design and development team of Endurance successfully applicated a 48-millimeter diameter inverted front fork for a major European client. This is the largest diameter front fork being used worldwide and help us in our future growth. In our suspension business, we continue to undertake various projects to help in our profitable growth. We have spoken to you in the past about our backward integration through aluminum forgings. We are also engaging other levers as value engineering, right sourcing and process innovation to lower our cost and remain competitive.

Now moving on to our braking segment, which shows a robust improvement in every dimension, namely scale, operational parameters, cost competitiveness, order acquisition from multiple OEMs and increase in our share of business. These are our key strategic strengths. The total income from our braking business doubled in just 2 years from INR 5,950 million in FY '22 to INR 11,600 million in FY '24. The higher demand made us set up a second brakes factory at Waluj Industrial area. The new factory has now reached close to peak volumes within 2 years of SOP, and now we are undergoing a further expansion. Since we began the manufacturing and sale of the single-channel ABS in September 2021, we have around 700,000 numbers of ABS ensuring rider safety on the roads. The 2-channel ABS is also at an advanced stage and is expected to start SOP in quarter 4 of this financial year.

The manufacturing of brake systems and disc brakes is constantly being upgraded to improve our cost competitiveness, improving the product offering and its applicability to the premium segment of 2-wheelers. Some of the recent improvements are advanced equipment for brake discs, in-house manufacturing of ABS valves as well as stainless steel braided hoses. These both are import substitutions and also the launch of our Grimeca brand brakes in the premium segment of 2-wheelers. Our technical capabilities are constantly being improved with enhanced R&D, calibration and testing and hiring of experts in braking who are engaged among other things, in the development of the ABS ECU, which is electronic control unit for in-house manufacturing.

Importantly, an advanced braking system development activity has been started jointly with one of our European OEM clients, which will help us to offer the best technology in braking systems, both to India as well as our overseas OEM clients. Also for enhancing our brake steel braided hoses technology, we are setting up a facility for the same in-house at our second Waluj brakes plant, which will give us additional brake assembly orders for exports overseas and for Indian OEM requirements. And this is expected to start SOP in January 2025.

In the Transmission Products segment, several OEMs are upgrading their clutch technologies to the assist and slip technology, which is of higher value-add and will contribute to our profitable growth. For the assist and slip clutches, we are offering technology from our European subsidiary, Adler with localization of the parts in India. This SOP will start in quarter 4 of this financial year.

As far as our transmission dry shaft business is concerned, at Waluj, the capacity is now being fully used. We at present manufacture for 3-wheeler OEMs and are targeting orders from 2 more OEM clients. We continue to maintain being a leader in the machine aluminum die casting business. In our Chakan castings plant, we are constructing a new building to cater to 4-wheeler machine casting requirement. Here, we will see improved quality standards and cost optimization because of automation. We have also put an unmanned machining line for a 4-wheeler application. A recent exercise of improving processes using TPM philosophy and other productivity tools is underway, and we are already seeing operational efficiency improvements.

Our strategic venture into electronics is slowly gaining traction, and this quarter witnessed certain turnaround events. Our battery management system offtake by a key OEM client has picked up, leading to a significantly improved financials for our subsidiary Maxwell and better use of Surface Mounted Technology line we have set up for BMS at our Waluj plant. Further, our pursuit for electronics business other than BM is also progressing well.

I will now touch upon our order intake, which was part of our presentation that was uploaded last evening. Our order wins and request for quotes where we are targeting new business is a testimony to our market leadership and ability to increase our content per vehicle in several models across OEMs. In the last 6 months, we have won INR 3,082 million of non-Bajaj orders, bulk of which are new orders. Only INR 334 million of these orders are of replacement nature. With this, the new orders booked over the last 4.5 years has reached INR 29,268 million, which should reach peak in FY '27. These orders involve diversification of our customer portfolio and expansion of our share of business with all the OEMs across our product range.

The major orders won till date in this financial year are for the Hero MotoCorp brakes business, TVS brakes business, Ather Energy battery part aluminum casting business and Generac USA aluminum casting business for their stationary engines. We are in the process of submitting our quotations for business totaling INR 22,153 million. In quarter 2, Bajaj Auto, our major customer has shown a healthy growth in volumes, both in 2-wheelers and 3-wheelers. And we also had a good growth in our sales, which was experienced by the use of a better premium product mix, especially in the areas of suspension and braking.

Coming to our focus on ESG. Endurance is striving for being carbon neutral through solar and wind power and driving free plantation. We are also seeing increased use of natural gas and LPG in view of diesel and furnace oil. We have reached a carbon-neutral percentage of 35% till date in FY '25, and our aspiration is to reach a carbon-neutral percentage of more than 50% by FY '30. We are also focusing on lowering hazardous waste generation, achieving zero waste to landfill, improving water recovery percentage and lowering resource consumption per unit of sale, not only in our plants, but also in the value chain.

On the social front, our focus and emphasis is on human capital management, labor practices, health and safety, and talent diversity. We are happy to induct in our Board of Directors of Endurance and its 2 direct subsidiaries in Europe, Mr. Alfredo Altavilla. He is an Independent Director. He is an industry stalwart with a commendable track record serving in senior roles, including Board seats in global automotive companies such as Ferrari, Teksid, and Chrysler. I also take this opportunity to thank our earlier Independent Director, Mr. Roberto Testore, for his contribution to Endurance in his role as an Independent Director.

Endurance Technologies has been recognized by its OEM clients, its customers and industry forums with several awards and recognitions. Some of them are the Best Delivery Management Award from Honda Motorcycles and Scooters India in 2024. Persistent Affiliation Award from Piageo in 2024. The Value Engineering Award from Royal Enfield in 2024 and the Ford Q1 Certification for the die casting and machining plant at Chakan in 2024.

We are also making good progress on executing our strategy for growth, which focuses on, firstly, to further strengthen our presence as a 2-wheeler Tier 1 supplier, which at present is our core business in India by supplying multiple products to all OEMs with high share of business. Also by improving the product mix by providing more high-value parts in this space. For example, paper-based clutch assemblies, the new assist and slip clutch assemblies, inverted front forks, rear mono shocks, single channel and dual channel ABS, machine castings, structural parts and components for premium 2-wheelers. Secondly, to increase our 4-wheeler share of business from existing percentage of 25% to 45% by FY '30.

I spoke to you earlier about the progress of our 4-wheeler marketing team, which has made with new orders and RFQs for our new AURIC Shendra aluminum machine casting plant. We are also targeting entering into the 4-wheeler drivetrain products. We are expanding our aluminum forging unit, where we will target more 4-wheeler business. In view of products required by 4-wheeler OEMs, we are adding an advanced friction stir welding technology in our aluminum forging plant. This is to supply to 4-wheeler OEMs. For products such as suspension, brakes, alloy wheels, where we are a leader in the 2-wheeler space, our pursuit is to offer technology-intensive products now to the 4-wheeler OEMs through technology agreements or through M&A or through joint ventures, which is progressing well.

Our aim is to continue to grow our Europe business, which, in any case, focuses on 4-wheeler, both organically and through M&A. Thirdly, in aftermarket, our focus is on further growing our distribution network, reaching out to retailers and mechanics with use of digital technologies, accelerating the fulfillment and lowering the proliferation of spurious parts. We've also expanded to vehicle models where we do not serve the OEMs. Our success in these products puts us in a position of a ready choice supplier for these OEMs.

In the export markets, we aim to add new countries, expand our dealer network, target growth in each country for each product segment and expand the product offering. In Europe, we intend to grow our aftermarket business in the 2-wheeler space with our subsidiary companies, Adler, Frenotecnica and Newfren. Fourthly, we will keep an eye on the pace of electrification in different vehicle segments and different markets. Our strategy is to ensure good order intake for the EV and hybrid segments, particularly in the areas where electrification is rapid.

Finally, we are invested in electronics through our acquisition of Maxwell and our investment in the surface-mounted technology line in our Waluj plant and for our ABS electronic control unit requirement. We also have electronic control damping and suspension. With greater use of electronics in our existing and future products, we will continue to invest in and launch new electronic applications.

In Europe, in the first half of FY '25, we won orders for peak annual sales of EUR 23.6 million. This includes machine castings for the BMW EV transmission of EUR 10.5 million and assemblies for the Volkswagen EV castings of EUR 7.6 million. Further, we have won orders for EUR 1 million of finished aluminum castings from a nonautomotive client. Our European business has stood strong in spite of headwinds in the form of pandemic-induced lockdowns, extremely high energy prices and low vehicle sale volumes due to demand or supply chain issues.

Our focus on serving the OEM customers through product development, quality, competitive pricing and professional service has been unwavering. Internally, we are focused on making ourselves financially stronger and more diverse. Our OEM customers see this as a strength for their supply chain. With new orders and increasing market share, Endurance's Europe business is well placed in terms of combating the adverse market conditions.

Now coming to the financials. The quarterly information has been uploaded at the stock exchanges last evening, along with our presentation explaining the numbers. I will, however, describe a few key data points. The quarter witnessed a strong performance on all parameters. Our stand-alone and consolidated total income grew to INR 23.2 billion and INR 29.4 billion, respectively, which is a 16.8% and a 14.8% year-on-year growth. Our stand-alone and consolidated net profits grew to INR 1.85 billion and INR 2.03 billion, respectively, which is a 29.7% and 31.3% year-on-year growth. Our profit after tax percentage growth, which is twice the total income growth reflects a healthy expansion of margins. It is important to note that our European subsidiaries in euro terms achieved a total income growth of 6.5% and net profit growth of 12.8% versus the same quarter last year, which is commendable given the market scenario in Europe.

Now with these opening remarks, I would now like to invite questions from all of you.

Operator

[Operator Instructions] The first question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities.

M
Mumuksh Mandlesha
analyst

Sir, can you provide some more details on how you see the revenue ramp-up for the new AURIC plant, which is starting from the next year? And any details on what kind of products we are targeting? Also on this, can you add for the 4-wheeler segment, you mentioned about the drivetrain products and forging -- aluminum forging opportunities. Can you share more how do you see the revenue projection for this new products?

A
Anurang Jain
executive

Yes, sure. See, as far -- see the first project we had announced was for the 4-wheeler aluminum machine castings as well as the non-auto aluminum machine casting, which was in the AURIC Shendra area at Chhatrapati Sambhajinagar. And this plant already, the construction has started. And we are targeting that by second quarter of next financial year, we are able to manufacture aluminum die casting with machining for both overseas as well as Indian OEM clients, including non-auto clients.

Now we are at a very good stage, and that's why I said we are progressing well. I'm not allowed to give the names of the OEM customers to you because there are some NDAs we have signed. But we are at a very good stage of having won certain orders, some orders are in progress. And that's why I said that we are quite confident that we will meet our business plan in the next 3 years, which we have planned. And this business plan sales will start from -- in fact, it will start from the next financial year, which is quarter 2 of FY '26. So I will not be able to throw much light on the customers, but the product are large aluminum die casting parts of various types. It's for automotive, 4-wheeler as well as for nonautomotive. And this is our focus towards the 4-wheeler growth.

On the second part, as far as the second project is concerned, which is on the 2-wheeler alloy wheels, this is because we -- like we have a capacity of 5.5 million alloy wheels in our Chakan plant in Pune, and there's a huge demand for these products and that's why looking at the pressures, which are there, we are putting up another plant of about 4.5 million wheels per annum. And this plant is going to start in September 2025. So these are very 2 -- they are 2 plants, which will really add to our profitable growth. And it will really, I think, also increase our sales quite substantially. Now which was your other question, was on the drivetrain?

M
Mumuksh Mandlesha
analyst

Yes, drivetrain and aluminum forging, sir.

A
Anurang Jain
executive

Yes. As far as the aluminum forging is concerned, the history is that we have started as a backward integration required for our inverted front forks, which is there, and it's been a game changer, I said. Also for the real mono shocks, where you have a hydraulic preload, this adjuster casting required. These are all import substitutes. But once we started this, we are finding a lot of interest from the core 4-wheeler OEMs also, both for India as well as export as well as for the 2-wheeler also. So this plant is rapidly expanding, which is in Aurangabad, which is -- I mean, Chhatrapati Sambhajinagar.

And this will do quite well and the margins are also quite good. So this is a very good growth. It's a strategic one for our inverted front forks, rear mono shocks, but now we are seeing opportunities to directly supply to 2 and 4-wheeler OEMs, both in India as well as export. And we also won some orders, but the details of the customer, I don't know whether we have mentioned it. No, we are not supposed to, okay. So I cannot give you the name of the customer. As far as the drivetrain is concerned, I'll request Mr. Rajendra Abhange, our Director and COO, to speak a few words on that.

R
Rajendra Abhange
executive

Yes. So first of all, thanks for asking more information about our journey into 4-wheelers, specifically what you talked about, the drivetrain products. You see drivetrain is considered to be one of the most critical component of any 4-wheeler. And we have chosen to be in this space, taking into account that we have good experience already in 2-wheelers and 3-wheelers. 3-wheelers, we already make these kinds of products. Without mentioning the name of the customer and without mentioning the exact product, I can only tell you that we are in very advanced stages of making commercial production for these kinds of products early next year.

So all the CapEx and everything is in the pipeline. And once the SOP and LOIs are on place, we will make it public probably next quarter. So it's not just one product in the drivetrain. There are multiple products, which also involves high-precision mechanical components as well as electronic components, which has got programs and the softwares in-built into it. So this is all for the modern generation 4-wheelers, which are being produced in India.

M
Mumuksh Mandlesha
analyst

Got it, sir. This is really helpful, sir. Just possible to share what kind of CapEx we are doing for this aluminum forging and the drivetrain products, sir?

A
Anurang Jain
executive

You see, it is a running CapEx, okay. I will get back to you with an answer, but I'll just give the answer in general afterwards. I'm just asking -- or do you have it? Okay. Right now we just like to give you the right figure. But this, I'll get back to you on this call itself.

M
Mumuksh Mandlesha
analyst

Sure, sir. Sure. Secondly, on the alloy wheel, sir, how do you see this new capacity being utilized? I mean how much period from FY '26, do you see the [ integration ] happening? And also any more color on the new customer wins we have, including the EV? Are there the new customers adding the capacity in the AURIC region? And also, how do you see the market share changing with these new wins, sir?

A
Anurang Jain
executive

No. In fact, as far as 2-wheeler is concerned, the pressure is, I mean, tremendous. And that's why there's a gun pointing at our head, I will just put it that way. In fact, people want it actually tomorrow. So to answer your question, it will be fully used. The question is, we also need a certain period to go -- to increase step by step, but that step by step will be very, very fast from September '25 onwards. In fact, the pressure is very high. And it will be to new customers also. Just to answer your question, I can't give you the names, but it will be to new customers also including for EV as far as the alloy wheels are concerned.

M
Mumuksh Mandlesha
analyst

Got it. And so basically, in say, 1 or 2 years, we can see the ramp-up happening for this new addition also?

A
Anurang Jain
executive

Sorry?

U
Unknown Executive

In 1 or 2 years, do we see a ramp-up happening?

A
Anurang Jain
executive

Yes, yes, we have to reach full volumes by the second year. We don't have a choice.

M
Mumuksh Mandlesha
analyst

And in terms of market share for this segment, do you see that has increased, sir, with the new order wins, sir?

A
Anurang Jain
executive

Yes. See, right now I mean, if you see our alloy wheel market share is 13.3%, okay? And this will take us, I think, to 25%. I think so. But the thing is it depends on how much the growth will be there in the 2-wheeler industry. So I can say based on the existing volume, the 13.3% will become 25% with the new plant coming up.

M
Mumuksh Mandlesha
analyst

Got it, sir. Sir, lastly, on the financial side, the aluminum prices have increased in recent quarters. Has there any impact in the Q2 quarter? And just want to understand generally what is the pass-through lag for the aluminum prices? And secondly, on the incentive part, what is the incentive expected for the second half, sir?

A
Anurang Jain
executive

Okay. So I will request our Group CFO, Mr. Raja Sastry, to speak on this. But just to answer one question, the aluminum increase or decrease is a pass-through, 100%.

R
R. S. Raja Sastry
executive

So if you look at comparing the first half of this year versus the first half of last year, aluminum rates have gone up from INR 200 to INR 213 on an average. And we have passed on every rupee of this increase. We also had some marginal increase in steel and other products, but we have -- as per our contracts, we have managed to pass on every single rupee of increase to our customers. Of course, it does have a load -- a contribution load as they call it, because we get a rupee to rupee advantage and not the contribution out of that. However, from a compensation perspective, the compensation is complete, and we have booked all the compensation. And we have amended purchase orders for this year.

M
Mumuksh Mandlesha
analyst

Got it. So there's no impact of that in the current quarter?

R
R. S. Raja Sastry
executive

The mega project incentive of the total of INR 447 crores, which we had to book on the earlier mega project incentives, we still have another INR 8 crores to book. And receipt of cash against that, we already have received about INR 283 crores, and we have to receive another INR 164 crores to receive out of that. So the progress on the earlier mega project incentive is good. And we already are in an advanced stage of filing our applications for the next 2019, 2024, which is now extended 2025 mega project incentive also. And the entitlement for this incentive is higher than the earlier one. And as we have more details, we will explain to you.

A
Anurang Jain
executive

Yes. I think that answer is there for your question. No, it's not there. I think they're finding out the exact CapEx. Okay. So we'll get back to you on the CapEx.

Operator

The next question is from the line of Aditya Jhawar from Investec.

A
Aditya Jhawar
analyst

Congrats on good set of numbers. My first question is on our aluminum alloy wheels, what is the expected contribution at 9.8 million in overall revenue? That is number one. Number second is that what would be the share of imported alloy wheels in India as we speak?

A
Anurang Jain
executive

No, Aditya, we do not share the contribution figures. We don't share. I can only say that it's an important part of sales growth and profitable growth. So I cannot give you the contribution figures. It is a sensitive information.

A
Aditya Jhawar
analyst

And import share in India?

A
Anurang Jain
executive

The import of alloy wheels?

A
Aditya Jhawar
analyst

Yes, yes.

U
Unknown Executive

Import, yes. How much is imported?

A
Anurang Jain
executive

How much -- see, as far as I know, there would be very small pockets where certain customers are importing, but I think it's practically 0 now as far as imports are concerned. It's all bought from Indian OEMs or there are foreign players who are in India. But as far as I can think, I've not heard of any imports as of now. I think it practically stopped. But I could be wrong. I mean, there could be a few pockets.

R
Rajendra Abhange
executive

I will add to what you said. You see there is a BIS introduction in India, as you might be aware. BIS, Bureau of Indian Standards, against which the imports are not allowed. Only if you're exporting the vehicle, I think, in that context, you can get some special alloy wheels. But now almost everything is localized.

A
Aditya Jhawar
analyst

Sure. That's helpful. Second question is on profitability of the stand-alone operation. So this time around, we saw a spike in OpEx, operating expenses. So it almost increased 20% Y-o-Y to almost about INR 400 crores. So is there anything that you would like to call out on this? Why this question? Because if you look at our margin expansion, it is largely driven by gross margin. We did not have a significant benefit of operating leverage despite a 16% top line growth. So is there anything that you would like to call out in OpEx, number one. Number second, how should we look at stand-alone margin in the medium to long term?

A
Anurang Jain
executive

So Raja, would you like to take that question?

R
R. S. Raja Sastry
executive

So Aditya, good question. See, our stand-alone income went up by 16.8%. And if you look at our PAT, it has gone up by 29.7%. So I would still say there is an expansion in margin; however, your question on the other expenses is correct. There has been an increase, while our raw material costs have gone up by 15.2%. Other expenses have gone up by 19.6%. We do have a pretty detailed analysis into why these expenses have gone up. There have been some special processes, which we had to add to our production like we had to have some annualizing processes for specific customers.

They were impacted by the minimum wage increase and certain other topics, which increased our other expenses. However, there are quite a lot of initiatives underway in terms of improving our efficiencies and the Managing Director mentioned about the TPM exercises in some of our plants. And these are specifically aimed at improving our operational efficiencies, thereby see that we are gaining more because of the volume increases, which we are having and ensure that we have better expansion of margin. Does that answer...

A
Aditya Jhawar
analyst

Yes. To some extent, because some of the items you mentioned are more part of COGS and employee costs. Now one would expect that with a better utilization of some of our plants, especially the suspension plant, we could start seeing a slight better performance at EBITDA level. But EBITDA margin increased only by 40 basis points Y-o-Y. That was driven by gross margin. So I'm just trying to understand that is there this number of INR 400 crores, is there anything onetime that you would like to call out? Or this is a recurring run rate from here on? And when we have to look at margin from FY '25 or '26 perspective, what are the drivers of margin expansion? Or are there any headwind? Because multiple factors will flow with regard to product mix change, greenfield facilities coming on stream. And so if you would like to throw some light on how should we think about margin for the next 2 years?

R
R. S. Raja Sastry
executive

So I will go with your last question first. The greenfields, which are being set up, right? Because if you look at the alloy wheel plant, which we are setting up, all the lessons which we have learned in our existing facilities, which are manufacturing a significant portion of alloy wheels are already implemented at a design stage. So the aim of these new greenfield facilities is to be margin accretive point one.

Second element is, do we see any headwinds because of different product mixes? No, we only see tailwinds because the kind of order acquisition, which we have is in the proprietary range and also some of our better product range. So we're only seeing that it will be benefiting our margins from the product mix perspective. And the most important element is as we now are looking at our operational efficiencies with much bigger -- with bigger, more powerful lenses, we are only seeing that our ability to get more out of our revenues in terms of margins will only improve. So overall, we only see good news as far as the margin expansion is concerned, unless something very untoward or something completely out of our control happens. But the aim and the trajectory from here on, we see a very strong performance from us.

A
Aditya Jhawar
analyst

Sure. Next question is on Europe. It would be great if Massimo, you can highlight -- so clearly, there's a BMW order win for e-axle. It's a big development. So how is the commissioning -- commercialization of this plant, number one? Number second, that the new facility for transmission housing that we have made in Italy, if you can talk a little bit more about it in terms of where are we in terms of ramping up, what could be the potential revenue? And are we targeting new set of customers from this business line?

M
Massimo Venuti
executive

Okay. So the first question, we closed this agreement with a new customer for us, AISIN is a company inside of Toyota Group. They took this important business for BMW, and we are their partner for the raw part and machining of this component transmission. This is a strategic project of BMW. They want to reach 500,000 parts per year starting from 2027. The start of production will be in 2026, and we will do the foundry and machining activity in Germany. Speaking about the second project, transmission for Punch Stellantis, as you know, we acquired 2 years ago, 850,000 parts per year. We started the production in July of the previous financial year. In this moment, we are reaching 45,000 parts per month.

We will reach 65,000 the top of volume starting from the second week of December of this financial year. And in this moment, we are discussing with the customer a possible increase of volume for this part. This is an absolutely strategic project for us because we are speaking about only machine, so the added value is very high. And this is the reason why in our profit and loss in this quarter, you see an important increase of the other expenses due to the fact that in this moment, we are using for this new plant, rent people because we want to maintain flexibility.

And this is the reason why there is an increase of other expense and nonmaterial cost. The total turnover of this project could be EUR 70 million, more or less, EUR 75 million. And the peak of volume will be in February of the next financial year. But I repeat, we are discussing this moment with Stellantis the possibility to increase on top of 850,000 parts other volume, which depends on the market. But as you know, in this moment, in the European market [indiscernible] solution is the first one in terms of volume.

A
Aditya Jhawar
analyst

Okay. That's quite helpful, Massimo. Final question is on outlook of Europe. This quarter, we did reasonably well. Despite a decline in registration, we reported a strong growth of about 6%. But looking at next few quarters and the interaction with customers, what is your sense in terms of overall industry growth in Europe in the second half of the year? And what should be that number for Endurance?

M
Massimo Venuti
executive

So the situation in Europe in this moment, frankly speaking, is not so good. But touch wood, the situation of Endurance is completely different. The market closed with a reduction of registration of 6.4% in the previous quarter and Endurance grew 6.4% compared to the previous quarter. So it means that we are gaining market share to our competitor, and this is due to the fact that in the last 5 years, we acquired an unbelievable number of projects, EUR 160 million, and we are starting production with this new project.

And even if I analyze the single project compared to the volume of the previous year, we have seen a reduction that everybody are seeing into the market. With the start of production of the new project, we are growing in an important way. We closed, in terms of turnover, with EUR 6.9 million compared to 62.8% with an increase of 6.4%. EBITDA grew 15.1% compared to the previous year. We closed with 16%, EUR 10.7 million in the second quarter. The net result was EUR 2.9 million, 4.3% with an increase of 14.7% compared to the previous year.

If you ask me, as you know, the second quarter in Europe is usually the less one in terms of volume because we have August, August is historically a month of holiday. And this is the reason why if you compare the quarter compared to the first quarter, there is a reduction. But in the previous quarter, there was a reduction compared to the previous quarter of 20% of registration. And so Endurance is growing more than the double compared to the market. And so also for the future, I see this scenario, and I repeat. I'm really optimistic for the third and for the fourth quarter of this financial year.

Operator

The next question is from the line of Jinesh Gandhi from AMBIT Capital.

J
Jinesh Gandhi
analyst

First question is on the PV drivetrain business, which we are talking about. So this is going to be through the aluminum die casting technology or we are looking beyond that and totally different product or technologies, which will be coming into that? We talked about electronics as well, but can you throw more light on that?

A
Anurang Jain
executive

Yes. Thanks for the question. The drivetrain products are not the die cast products, which we are already into. We're already supplying to major OEMs in India and overseas. These are proprietary products in nature, and they are engaged in transmitting the motion to the wheels. So the castings are stationary components, but these are rotating components. And it has also got electronics inbuilt into it because the vehicles are getting smarter. So we are offering a complete solution to the vehicle manufacturers.

J
Jinesh Gandhi
analyst

And this is developed in-house or we have a partnership with someone?

A
Anurang Jain
executive

This is -- part of it is in-house and part of it is going to be in partnerships.

J
Jinesh Gandhi
analyst

Got it. Got it. Second question is with respect to the alloy wheel business. So clearly, there is a good amount of demand, which is there, but there is a substantial amount of capacity addition happening, not just at Endurance, but other players as well. So in that context, how should we think about the margins for aluminum alloy wheel business, would it be similar to the stand-alone margins better or lower, if you can talk directionally about it?

A
Anurang Jain
executive

No, I don't see it will impact the margins. And I think the capacities, which are coming up are in line with the LOIs, which the customers are giving to different suppliers. Now of course, it will depend upon how the 2-wheeler industry grows. But there is also a use of alloy wheels, which were being -- which were not being used. There were those steel -- what do you call them, those steel wheels, which were being used, which are getting converted to alloy wheels now. So there are many tools, so the demand is also coming from there. You know what I'm saying, partly the growth and partly it is the substitution of aluminum alloy wheels with the earlier steel wheels.

And as far as margins are concerned, I don't see. I think industry has gone through, to be honest, a very torment time in the last 15 years with the Chinese imports and everything. Now I think the prices, I would tend to believe, are quite well settled, very competitive, and I don't see a change there.

J
Jinesh Gandhi
analyst

Got it. Got it. And with respect to ABS, how big ABS business is now given that we are already supplying single channel ABS. Can you talk about the size of the business now and also the road map going forward on the dual channel ABS, any order wins on that side?

A
Anurang Jain
executive

Yes. See, right now we are supplying at a run rate of 400,000 single channel. Now we have a capacity of another 240,000, which is for the dual channel, which as I said is starting in quarter 4 of this financial year. And -- so right now you can say that the capacity, which we will have is 640,000 in a market of maybe 3 million, 3.5 million or, I would say, more towards 3.5 million. So we will slowly ramp up based on our technical capabilities and competitive pricing.

We will slowly scale it up partly with volumes increases, partly from taking share from the competition, but that's our goal to keep increasing this business by going step by step. So the next step is to go into dual channel with 240,000 ABS per annum. That's the next step.

J
Jinesh Gandhi
analyst

Right. And have you got orders for dual channel already or we are in process of getting orders there?

A
Anurang Jain
executive

Yes, yes, we have dual channel in process, so that's why I'm telling you quarter 4.

J
Jinesh Gandhi
analyst

Okay. Got it. And a clarification on the incentive side. So would it be fair to say that by the time this balance INR 8 crores of incentive under old scheme gets recognized probably maybe in 3Q or early next year, and the new scheme comes into operational, there will be gap in FY '26 where incentives may not be material. Would that be fair understanding?

R
R. S. Raja Sastry
executive

The applications have been made. We are waiting for the eligibility certificate. And we will take it as it comes. So our anticipation and our expectation, our work is to make it happen as quickly as possible. But given that there are elements where we have to allow the administrative mechanism to work through its course, we will make more comments or we'll give a confirmation as and when it happens. But the efforts from our side, the eligibility from our side and all the collection, collation of data, we have completed our part of it. We are just waiting for the administrative process to take its course. And then as quickly as possible, as and when it happens, we'll make a statement on that.

J
Jinesh Gandhi
analyst

Got it. Got it. And last question on the European business side. So we have seen a material divergence between how the EV business has been shaping up in the European market, EV demand has been shaping up in the European market. And whereas when we look at our order wins, almost 77% of our order wins are coming from EVs now as against much lower salience in the total order book. So how do we balance out with respect to our CapEx versus the order book built up towards EVs?

A
Anurang Jain
executive

So Jinesh, your question is about CapEx versus the order intake. What exactly was the question? We couldn't hear you. Can you make a precise question?

J
Jinesh Gandhi
analyst

Yes. So the question for European business is that we are getting substantial orders for EVs. In first half, 77% of orders came from EVs, whereas the EV volumes in the markets are not growing or rather moderating materially.

M
Massimo Venuti
executive

Okay. Jinesh, I understood. See, yes, it's true. We acquired a lot of business in the last 4 years in the electric. But in this moment, one of the reasons why we are growing more than our competitor is that we are doing the same level of turnover with the internal combustion engine as in the past, and we are increasing due to the start of production of the electrical vehicle. This is the reality. The important effort in terms of the investment we have done in the last 2 years, I remind to you that the last financial year, Endurance overseas closed with EUR 62 million of investment.

In the first 6 months of this financial year, we invested EUR 28 million, for sure, with the support of our customer. But the major reason of our increase of turnover is that, for sure, we are taking share of market from our competitor, but basically in the electrical vehicle. Even if in this moment, a lot of countries are reducing the incentive in the electrical vehicle, please consider that in the first quarter, in the second quarter, the BEV reached 15% of the market. So it's absolutely interesting.

J
Jinesh Gandhi
analyst

Okay. Got it. And lastly, on comment on M&A as a route to grow in the European market. Can you talk about -- would it be only in the existing aluminum die casting business? Or we are open to look at new areas beyond aluminum die casting in European market from M&A perspective?

M
Massimo Venuti
executive

This moment, we are seeing the market at 360 degrees. There are thousand and thousand opportunities. We are working in a tough way in this direction, and I hope to give you interesting news in the next call conference. But we are working 360 degree. As you can imagine, the major problem in this moment is the saturation capacity into the market. A lot of companies have financial problems. And so for Endurance, it is an opportunity because every day, we are involved from our customers to consider partnership to support them for the future increase of our product range in high-pressure die casting, in machining, and also in other sector.

A
Anurang Jain
executive

Well, I'd just like to give those CapEx figures. I think if it was a gentleman from Anand Rathi. So the CapEx for aluminum forgings, which is done till date is INR 63 crores and for driveshaft, it's INR 40 crores. I just want to just give that reply.

Operator

The next question is from the line of Arvind Sharma from Citibank.

A
Arvind Sharma
analyst

Sir, the first question is on the ramp-up schedule that you've given in the presentation. A very strong ramp-up expected in FY '26, almost INR 23 billion. Would it be fair to assume this is driven by the expansion in the 4-wheeler and non-autos? Or what would be the key drivers for this big ramp-up in FY '26?

A
Anurang Jain
executive

See the big drivers, one is, of course, on the 4-wheeler front, which is the AURIC Shendra project, 4-wheeler and non-auto. That will be one driver. And the second -- and there will be other drivers. One is the increase in the business we are getting on suspension, braking as well as the 2-wheeler new alloy wheel plant, which is being set up. But I think it would be both on the 2-wheeler and 4-wheeler space, yes. It is just not on the 4-wheeler. But we are fully focused on FY '30, reaching 45% of our group sales is in 4-wheelers. And there are a lot of efforts being made.

And as we go along, we will start informing you as it happens. Mr. Rajendra Abhange, our Director and COO, has already talked about it briefly. But what you see right now, whatever we have talked, is a combination of 2-wheeler and 4-wheeler, 2-wheeler is largely alloy wheel transmission braking. And on the 4-wheeler, it is this whole -- it will be the drivetrain and it will be the 4-wheeler aluminum die casting and machining at AURIC Shendra as well as in our plant at Chakan. I said a new building is coming up to cater to all 4-wheeler casting space. So it's a combination of both.

A
Arvind Sharma
analyst

Got it, sir. So it would be fair to assume a decent big ramp-up in FY '26 revenue over FY '25, purely based on the PPT that you have shared?

A
Anurang Jain
executive

Yes, yes.

A
Arvind Sharma
analyst

Sir, second question, just -- sorry, I missed it. The revenue, EBITDA and PAT in euro terms, I missed that part. On the European business, sir. I think Massimo shared, but I missed that part.

M
Massimo Venuti
executive

Second quarter, EUR 66.9 million total turnover, an increase of 6.4% compared to the previous year. EBITDA, EUR 10.7 million, 16% with an increase of 15.1% compared to the previous year. Net result, EUR 2.9 million, 4.3% with an increase of 13.7% compared to the previous year.

Operator

The next question is from the line of Pramod Amthe from InCred Equities.

P
Pramod Amthe
analyst

So this is some clarification on this drivetrain migration, which you have planned for 4-wheelers. Is it going to be for ICE vehicles? And how do you see it with the risk of EVs or hybrids?

A
Anurang Jain
executive

Sorry, can you just make the question clear?

P
Pramod Amthe
analyst

No. You said you are entering into a drivetrain components for 4-wheelers, right, if I heard you correct. So how do you see the risk of EV and hybrids when you are entering this new stream of business?

A
Anurang Jain
executive

Okay. Almost no risk, first of all, because EV penetration is still very small in 4-wheelers. And the ICE vehicles are produced in the huge numbers, and it's not going to reduce anymore. So our products are ICE agnostic; however, we don't see any risk of EV to these products, at least for the next 10 years. These are EV-agnostic products.

P
Pramod Amthe
analyst

But since you said it's more of a drivetrain, a little bit confused in terms of how it can be more EV agnostic. Maybe I can take it offline to get more details on this.

A
Anurang Jain
executive

Yes, we can take it offline.

P
Pramod Amthe
analyst

And second one is with regard to European business. Interesting to see new products taking your technology competence to a new level. So how do you see this BMW e-axle components versus what you are already doing for the other carmakers, one? Second, with regard to specialty plastics, is it a new avenue you are trying to look at as a business opportunity in the car space?

M
Massimo Venuti
executive

So regarding the first question, we are producing similar part for other customers, as you know, axle part and transmission for Volkswagen and Mercedes and so we don't see a particular problem. The strategic reason for this acquisition is due to the new customer AISIN. AISIN, as I told you before, is inside of Toyota Group, and so we are discussing other opportunities. This is the reason why from our point of view it's absolutely strategic.

But speaking about the complexity of the part, we don't see a particular problem also because we will produce this component with existing technology in terms of foundry, high level of automation as in the last 20 projects in Endurance overseas in Europe and with the same machine in our machining plant. So no issue -- particular issue compared to the existing product that we are producing. Regarding the second question, could you repeat your second question, please?

P
Pramod Amthe
analyst

Sure. So you also talked about the specialty plastic product win for Volkswagen. So I wanted to ask you, is it a big opportunity for the Endurance Group to enter into this new area of line of business, considering that you have been into metal forming all along?

M
Massimo Venuti
executive

Correct. As you know, we have Endurance Engineering that is our division of injection molding components. The importance of this acquisition is that it is the first acquisition with Volkswagen Group as Tier 1. As you know, in the past in Endurance Engineering, we grew an important way, thanks to the reverse engineering from aluminum component to plastic. And this is the first acquisition that we do, Volkswagen Group directly in the plastic. And why strategic? Because unfortunately, the plastic components, in this moment, there are a lot of production capacity free into the market, a lot of companies with financial problem.

And for this reason, the customer is considering the opportunity to start in production with the new supplier. And for this reason, I presume that if we are able, as I'm sure to respect the quality and the due date for the start of production, we could be involved in other future projects in the plastic with Volkswagen Group, with Porsche, with Audi, with Skoda, with all the brands that we are serving for the aluminum high-pressure die casting and gravity at this moment.

Operator

The next question is from the line of [ Dev Agarwal from Fincom Family Office. ]

U
Unknown Analyst

So I just wanted to know about your outlook on the entire aluminum casting sector and your current market share, if you can share it? And secondly, we are right now reading the articles of the auto dealers having inventory of around INR 80,000 crores. So do you see any risk of delay in offtakes of any aluminum casting products? And any risk to entire aluminum casting sector?

A
Anurang Jain
executive

No. As far as the stocks of the 4-wheeler passenger cars are concerned, I can only answer for ourselves. We have not got any indication as such that there would be any impact on our sales or on our business. So I will not be able to tell you in general about the overall sector in India and the impact it will have. But we are not seeing much of an impact in India. Because in India, as you know, almost 80% we have 2-wheelers. So we are not seeing that kind of impact in our business in India. As far as the aluminum casting, if you're asking what would be our share of business you asked?

U
Unknown Analyst

Yes, your share of business and the entire outlook.

A
Anurang Jain
executive

See, we don't have a market share. I mean we have a capacity of 100,000 metric tons per annum in our various plants, and which is, of course, is being largely used. And because you have so many number of players into smaller aluminum castings, different types of casting, low pressure, gravity, high pressure, very difficult to have a market share. There is no industry body, which is giving these figures to us. So I will not be able to tell you. But as a company, of course, see, aluminum casting as a metal, whether it's casting or forging is a huge opportunity because it is used more in EVs, we are finding. Whether it's hybrid EVs or the ICE engine passenger cars or 2-wheelers, 3-wheelers. The juice is more, which I've explained in earlier quarters.

So we are in a very good space, and we are taking the opportunities where there is profitable growth. So that is our focus. But the opportunities are a lot in this space. So we are in a good space as far as aluminum casting because we have the expertise. We have own engineering, we have our own tool room. So we are very competitive, and we have the technology. We have done in the past gravity die casting, converted them to high-pressure die casting, low-pressure die casting to high-pressure. So we have a lot of expertise and a lot of experience over the last 30 years in this space. So I would say as far as aluminum die casting is concerned, we are in a very good space for the future.

Operator

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

A
Anurang Jain
executive

No, I don't think I have any further closing comments. I just had my opening remarks. So I mean, thank you for the call, and thank you to everybody for taking your time out for this call. Thank you.

R
Rajendra Abhange
executive

Thank you.

R
R. S. Raja Sastry
executive

Thank you.

Operator

Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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