The December quarter results present a mixed narrative: whilst revenue touched an all-time high of ₹3,608.22 crores, operating margins contracted sequentially, and profit after tax margins declined to 6.14% from 6.34% in the previous quarter. This divergence between revenue strength and profitability pressure raises important questions about the sustainability of earnings quality in the current operating environment.
The company's performance in Q3 FY26 demonstrates the challenges facing auto component manufacturers as they navigate rising input costs, evolving product mix dynamics, and competitive pressures. Whilst Endurance has successfully scaled its revenue base—growing at a compound annual growth rate of 17.79% over the past five years—the recent quarter highlights the difficulty in translating top-line growth into proportionate bottom-line expansion.
Financial Performance: Growth Momentum Meets Margin Headwinds
Endurance Technologies delivered its highest-ever quarterly revenue of ₹3,608.22 crores in Q3 FY26, representing a modest sequential increase of 0.71% from ₹3,582.82 crores in Q2 FY26 and a substantial year-on-year jump of 26.20% from ₹2,859.16 crores in Q3 FY25. This sustained revenue trajectory underscores the company's ability to capture market share in India's expanding automotive sector, particularly in the two-wheeler and commercial vehicle segments where Endurance maintains strong positioning.
However, the profitability narrative presents a more nuanced picture. Net profit stood at ₹221.64 crores in Q3 FY26, declining 2.48% sequentially from ₹227.27 crores despite the marginal revenue increase. This compression in absolute profit reflects margin pressures across multiple levels of the income statement. Operating profit (PBDIT excluding other income) reached ₹477.13 crores, barely inching up from ₹476.84 crores in the previous quarter, resulting in operating margin contraction to 13.22% from 13.31%.
| Metric | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 3,608.22 | 3,582.82 | 3,318.89 | 2,963.49 | 2,859.16 |
| QoQ Growth | +0.71% | +7.95% | +11.99% | +3.65% | -1.84% |
| YoY Growth | +26.20% | +23.01% | +17.46% | — | — |
| Net Profit (₹ Cr) | 221.64 | 227.27 | 226.35 | 245.13 | 184.39 |
| QoQ Growth | -2.48% | +0.41% | -7.66% | +32.94% | -9.16% |
| YoY Growth | +20.20% | +11.97% | +11.03% | — | — |
| Operating Margin (%) | 13.22% | 13.31% | 13.37% | 14.26% | 13.03% |
| PAT Margin (%) | 6.14% | 6.34% | 6.82% | 8.27% | 6.45% |
The sequential margin compression becomes more pronounced when examining profit after tax margins, which declined to 6.14% in Q3 FY26 from 6.34% in Q2 FY26 and 6.82% in Q1 FY26. This downward trajectory over three consecutive quarters suggests structural challenges rather than temporary aberrations. Employee costs increased to ₹304.81 crores from ₹297.48 crores, reflecting ongoing inflationary pressures in labour markets and potential investments in talent acquisition to support capacity expansion.
Depreciation charges rose to ₹177.91 crores from ₹180.02 crores in the previous quarter, indicative of the capital-intensive nature of the business and recent capacity additions. The company's tax rate increased to 26.28% in Q3 FY26 from 25.27% in Q2 FY26, further pressuring net profitability. Interest costs remained relatively stable at ₹14.96 crores, reflecting the company's manageable debt burden with a debt-to-EBITDA ratio of just 0.57.
Operational Efficiency: ROE Concerns Amidst Capital Deployment
Return on equity (ROE) stands at 13.95% on average, positioning Endurance in the moderate efficiency category amongst auto component peers. Whilst this metric demonstrates reasonable capital utilisation, it trails several industry leaders who consistently generate ROEs above 15%. Higher ROE indicates superior capital efficiency and the ability to generate greater returns for shareholders from each rupee of equity deployed. In Endurance's case, the 13.95% ROE suggests room for improvement in converting shareholder capital into profits, particularly given the company's substantial market position and scale advantages.
Return on capital employed (ROCE) fares better at 18.45% on average, reflecting efficient utilisation of total capital including debt. The spread between ROCE and ROE indicates that the company benefits from financial leverage, though its conservative debt levels mean this advantage is modest. The company's balance sheet reveals shareholder funds of ₹5,717.42 crores as of March 2025, up from ₹4,977.44 crores in the previous year, demonstrating healthy capital accumulation despite dividend distributions.
Margin Pressure: A Closer Examination
The sequential decline in operating margins from 13.37% in Q1 FY26 to 13.22% in Q3 FY26, despite strong revenue growth, warrants attention. This compression suggests that the company is facing challenges in passing on input cost increases to customers, potentially due to competitive pressures or contractual pricing mechanisms. The gross profit margin has similarly contracted to 13.26% in Q3 FY26 from 14.04% in Q1 FY26, indicating pressure at the fundamental level of operations before considering operating expenses.
Fixed assets increased to ₹4,058.15 crores as of March 2025 from ₹3,630.24 crores in the previous year, reflecting ongoing capital expenditure to support growth and technological upgrades. This capital deployment is essential for maintaining competitiveness in an industry undergoing rapid transformation towards electric vehicles and advanced manufacturing technologies. However, the returns on these investments will be critical to monitor in coming quarters to ensure they contribute positively to profitability metrics.
Working capital management remains efficient, with current assets of ₹4,593.90 crores adequately covering current liabilities of ₹2,691.81 crores as of March 2025. Trade payables stood at ₹1,974.26 crores, representing a reasonable balance between maintaining supplier relationships and optimising cash flows. The company's cash position improved significantly to ₹1,018.00 crores as of March 2025 from ₹504.00 crores in the previous year, providing financial flexibility for growth investments and potential acquisitions.
Industry Context: Navigating Auto Sector Transformation
Endurance operates in India's dynamic auto components sector, which is experiencing structural shifts driven by electrification, regulatory changes, and evolving consumer preferences. The company's diversified product portfolio spanning suspension systems, transmission systems, aluminium die-casting, and braking systems positions it to benefit from growth across multiple vehicle categories. The Indian automotive industry's recovery from pandemic-induced disruptions has provided tailwinds, with two-wheeler volumes—a key market for Endurance—showing robust growth in recent quarters.
However, the transition towards electric vehicles presents both opportunities and challenges. Whilst Endurance has made strategic investments in electric vehicle components, including motors and controllers, the pace of EV adoption and the company's ability to capture market share in this emerging segment remain critical variables. Traditional internal combustion engine components, which still constitute a significant portion of revenue, face long-term headwinds as the industry gradually shifts towards electrification.
Competitive Positioning: Scale Advantages Under Test
Endurance's market capitalisation of ₹35,251.52 crores positions it as the sixth-largest player in the auto components peer group. The company's strong relationships with major original equipment manufacturers (OEMs) including Bajaj Auto, Hero MotoCorp, and Royal Enfield provide revenue stability and growth visibility. However, maintaining these relationships requires continuous investments in research and development, quality improvements, and cost competitiveness—all of which impact margins in the near term whilst building long-term value.
Peer Comparison: Valuation and Performance Metrics
Comparing Endurance Technologies with industry peers reveals interesting valuation dynamics. The company trades at a price-to-earnings (P/E) ratio of 40.77x on a trailing twelve-month basis, below the peer group average of approximately 64x. This relative discount reflects market concerns about margin sustainability and ROE performance compared to higher-quality peers. The price-to-book value (P/BV) ratio of 5.69x is similarly positioned below the peer average of approximately 9.1x, suggesting the market assigns a lower premium to Endurance's asset base.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) |
|---|---|---|---|---|
| Endurance Tech | 40.77 | 5.69 | 13.95 | 0.39 |
| Bosch | 46.64 | 7.69 | 14.23 | 1.45 |
| Bharat Forge | 76.61 | 8.85 | 12.80 | 0.49 |
| Uno Minda | 62.24 | 11.59 | 15.47 | 0.13 |
| Schaeffler India | 55.96 | 10.97 | 18.67 | 0.73 |
| Tube Investments | 76.31 | 6.47 | 17.76 | 0.14 |
The ROE comparison is particularly revealing. Endurance's 13.95% ROE trails peers such as Schaeffler India (18.67%), Tube Investments (17.76%), and Uno Minda (15.47%). This performance gap explains part of the valuation discount, as investors typically reward companies that demonstrate superior capital efficiency with higher multiples. The lower dividend yield of 0.39% compared to Bosch (1.45%) or Schaeffler India (0.73%) reflects a more conservative payout policy, with the company retaining earnings for growth investments.
From a debt perspective, Endurance maintains a conservative capital structure with zero net debt-to-equity ratio on average, providing financial flexibility that many peers lack. This strong balance sheet positions the company well to navigate economic uncertainties and pursue strategic opportunities without being constrained by leverage concerns. However, the challenge lies in deploying this financial strength to drive superior returns that can close the ROE gap with industry leaders.
Valuation Analysis: Attractive Entry Point or Value Trap?
At the current price of ₹2,506.10, Endurance Technologies trades at a P/E ratio of 40.77x based on trailing twelve-month earnings. Whilst this multiple appears elevated in absolute terms, it represents a discount to both the industry average P/E of 39x (noted in company data) and several direct peers. The price-to-book ratio of 5.69x suggests the market values the company's equity at nearly six times its book value, reflecting expectations of above-average returns on that equity—expectations that the current 13.95% ROE only partially fulfils.
The enterprise value-to-EBITDA multiple of 20.75x indicates how the market values the company's operating cash flow generation capacity. This metric, which accounts for debt and cash positions, provides a clearer picture of operational valuation. The EV-to-EBIT ratio of 32.59x is notably higher, reflecting the impact of depreciation charges on the company's earnings. For a capital-intensive manufacturing business, this spread between EBITDA and EBIT multiples is expected, though it underscores the importance of managing capital expenditure efficiency.
The PEG ratio of 3.00x raises concerns about valuation relative to growth prospects. A PEG ratio above 2.0x typically suggests that a stock is expensive relative to its earnings growth rate. With five-year sales growth of 17.79% and EBIT growth of 19.49%, the company has demonstrated solid historical expansion. However, the recent margin pressures and sequential profit decline suggest that maintaining this growth trajectory whilst improving profitability will be challenging.
The stock's 52-week range of ₹1,555.65 to ₹3,078.95 provides context for the current price level. Trading at ₹2,506.10, the stock sits 18.61% below its 52-week high and 61.10% above its 52-week low, suggesting it has retraced from peak valuations but still reflects significant appreciation from the lows. The valuation grade has fluctuated between "Fair" and "Expensive" in recent months, currently sitting at "Fair," indicating that the stock is reasonably priced relative to fundamentals but offers limited margin of safety.
Shareholding Pattern: Institutional Confidence Building
Promoter holdings remain rock-solid at 75.00% across the past five quarters, demonstrating unwavering commitment from the founding family. This high promoter stake, with zero pledging, provides stability and aligns management interests with minority shareholders. The promoter group, led by Anurang Jain (30.85%) and family trusts, maintains effective control whilst allowing sufficient free float for liquidity.
| Investor Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 75.00% | 75.00% | 75.00% | 75.00% | 0.00% |
| FII | 13.72% | 13.84% | 13.54% | 12.36% | -0.12% |
| Mutual Funds | 5.74% | 5.35% | 5.33% | 6.32% | +0.39% |
| Insurance | 2.90% | 3.21% | 3.81% | 4.28% | -0.31% |
| Other DII | 0.56% | 0.49% | 0.40% | 0.29% | +0.07% |
| Non-Institutional | 2.08% | 2.10% | 1.92% | 1.74% | -0.02% |
Foreign institutional investor (FII) holdings declined marginally to 13.72% in Q3 FY26 from 13.84% in the previous quarter, representing a modest reduction of 12 basis points. However, viewing the broader trend, FII participation has increased from 12.36% in March 2025, suggesting growing international investor interest despite near-term profit pressures. The presence of 193 FII accounts indicates widespread institutional ownership rather than concentrated positions, providing liquidity and price discovery benefits.
Mutual fund holdings increased to 5.74% in Q3 FY26 from 5.35% in the previous quarter, reversing the declining trend observed in earlier quarters when holdings fell from 7.09% in December 2024 to 5.33% in June 2025. This sequential increase of 39 basis points suggests that domestic institutional investors are viewing recent price corrections as buying opportunities. With 32 mutual fund schemes holding positions, the stock features in multiple portfolios, though the overall allocation remains modest compared to FII holdings.
Insurance company holdings continued their declining trajectory, falling to 2.90% from 3.21% in the previous quarter and 4.28% in March 2025. This steady reduction of 138 basis points over three quarters may reflect portfolio rebalancing or concerns about near-term profitability challenges. The combined institutional holding of 22.92% (FII + MF + Insurance + Other DII) represents significant professional investor participation, though it trails many large-cap peers where institutional ownership often exceeds 30%.
Stock Performance: Volatility Amidst Long-Term Gains
Endurance Technologies has delivered impressive long-term returns, with the stock appreciating 85.53% over three years compared to the Sensex's 37.10% gain, generating alpha of 48.43 percentage points. This outperformance reflects the company's successful navigation of the pandemic recovery period and strong execution on growth initiatives. Over a two-year horizon, returns of 38.31% versus the Sensex's 15.79% demonstrate consistent value creation, whilst the one-year return of 31.63% against the Sensex's 8.82% highlights continued momentum.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +2.54% | -0.87% | +3.41% |
| 1 Month | -2.87% | -0.93% | -1.94% |
| 3 Months | -6.87% | -1.93% | -4.94% |
| 6 Months | -0.98% | +2.87% | -3.85% |
| YTD | -3.25% | -2.78% | -0.47% |
| 1 Year | +31.63% | +8.82% | +22.81% |
| 2 Years | +38.31% | +15.79% | +22.52% |
| 3 Years | +85.53% | +37.10% | +48.43% |
However, near-term performance reveals concerning trends. The stock has declined 6.87% over three months compared to the Sensex's 1.93% decline, generating negative alpha of 4.94 percentage points. This underperformance coincides with the margin pressure visible in recent quarterly results and reflects market concerns about profitability sustainability. Year-to-date, the stock is down 3.25%, marginally underperforming the Sensex's 2.78% decline.
Notably, Endurance has underperformed its own sector, with the Auto Components & Equipments index delivering 36.82% returns over one year compared to the stock's 31.63%, resulting in sector underperformance of 5.19 percentage points. This relative weakness suggests company-specific concerns beyond broader industry dynamics. The stock's beta of 1.20 indicates higher volatility than the market, with an annual volatility of 32.77% compared to the Sensex's 11.46%, classifying it as a high-risk, high-return investment.
Technical Analysis: Bearish Signals Dominate
The technical picture for Endurance Technologies has deteriorated, with the stock currently in a "Mildly Bearish" trend since February 3, 2026. The stock trades below all major moving averages—5-day (₹2,516.76), 20-day (₹2,455.94), 50-day (₹2,542.82), 100-day (₹2,678.30), and 200-day (₹2,619.28)—a classic bearish configuration suggesting sustained selling pressure. The MACD indicator shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate mildly bearish conditions on the weekly chart.
Immediate support lies at the 52-week low of ₹1,555.65, a significant distance of approximately 38% below current levels, whilst immediate resistance emerges around the 20-day moving average area of ₹2,455.94. The stock faces multiple resistance layers at the 200-day moving average (₹2,619.28) and 100-day moving average (₹2,678.30) before it can challenge the 52-week high of ₹3,078.95. This technical setup suggests limited near-term upside potential without fundamental catalysts to drive momentum.
Delivery volumes have increased significantly, with trailing one-month average delivery volume of 60.59 thousand shares representing 61.55% of total volume, up 74.84% from the previous month's average of 34.66 thousand shares. This increase in delivery-based trading suggests growing conviction amongst buyers at current levels, though the bearish technical trend indicates that sellers remain in control. The recent delivery volume of 96.94 thousand shares on February 12, 2026, representing 55.84% of total volume, indicates heightened investor interest despite price weakness.
Investment Thesis: Quality Company at Crossroads
Endurance Technologies carries a "Good" quality grade based on long-term financial performance, supported by healthy sales growth of 17.79% annually over five years and EBIT growth of 19.49%. The company's capital structure earns an "Excellent" rating with zero net debt-to-equity ratio and strong interest coverage of 39.99 times on average. Management risk is assessed as "Good," reflecting stable promoter ownership and transparent governance practices. However, the financial trend has shifted to "Positive" from "Very Positive," indicating moderation in growth momentum.
The valuation assessment of "Fair" suggests the stock is reasonably priced relative to fundamentals, offering neither significant overvaluation nor compelling undervaluation. At a P/E of 40.77x and P/BV of 5.69x, the stock trades at a discount to many peers but commands a premium to book value that requires justification through improved ROE performance. The proprietary Mojo Score of 62/100 places the stock in "HOLD" territory, reflecting mixed signals across valuation, quality, and technical parameters.
Key Strengths & Risk Factors
KEY STRENGTHS
- Strong revenue growth trajectory with Q3 FY26 sales reaching all-time high of ₹3,608.22 crores
- Robust five-year sales CAGR of 17.79% and EBIT CAGR of 19.49% demonstrating consistent expansion
- Excellent capital structure with zero net debt-to-equity ratio providing financial flexibility
- Strong interest coverage of 39.99x indicating comfortable debt servicing capacity
- Stable promoter holding at 75.00% with zero pledging reflecting strong commitment
- Diversified product portfolio across suspension, transmission, aluminium die-casting, and braking systems
- Strong relationships with leading OEMs including Bajaj Auto, Hero MotoCorp, and Royal Enfield
KEY CONCERNS
- Sequential margin compression with operating margin declining to 13.22% from 13.37% in Q1 FY26
- Net profit declined 2.48% QoQ despite marginal revenue growth indicating profitability pressure
- PAT margin contracted to 6.14% from 6.82% in Q1 FY26, lowest in recent quarters
- ROE of 13.95% trails industry leaders, indicating scope for capital efficiency improvement
- PEG ratio of 3.00x suggests expensive valuation relative to growth prospects
- Stock in mildly bearish technical trend, trading below all major moving averages
- Underperformance versus Auto Components sector by 5.19 percentage points over one year
Outlook: What to Watch
POSITIVE CATALYSTS
- Margin recovery in Q4 FY26 through better operating leverage or cost management
- Acceleration in electric vehicle component revenue contribution
- New order wins from existing or new OEM customers
- Successful commissioning of recent capital expenditure projects improving efficiency
- Improvement in ROE towards 15%+ through better asset utilisation
RED FLAGS
- Further sequential margin compression in Q4 FY26 continuing the downward trend
- Inability to pass on input cost increases to customers indicating weak pricing power
- Deterioration in working capital metrics or cash flow generation
- Continued insurance and FII shareholding reduction signalling institutional concerns
- Technical breakdown below ₹2,400 levels accelerating selling pressure
The Verdict: Hold for Now, Monitor Margin Trajectory
Score: 62/100
For Fresh Investors: Not recommended for fresh purchases at current levels. The combination of margin pressures, bearish technical setup, and expensive valuation relative to growth (PEG 3.00x) suggests waiting for either clearer improvement in profitability trends or a more attractive entry point. Consider initiating positions only if the stock corrects to ₹2,200-2,300 levels or if Q4 FY26 results demonstrate margin recovery.
For Existing Holders: Continue to hold positions given the company's strong long-term fundamentals, excellent balance sheet, and leadership position in key product categories. However, closely monitor quarterly margin trends and be prepared to reassess if operating margins fall below 13% or if ROE deteriorates further. The stock's long-term growth potential remains intact, but near-term returns may be muted until profitability concerns are addressed.
Fair Value Estimate: ₹2,400-2,600 (broadly in line with current levels, suggesting limited near-term upside)
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
