CIE Automotive India Ltd. share price target

Q1CY21 revenue came at 32%YoY on the back of strong growth from both India and European business. The growth was largely driven by strong order intake and new customer addition. EBITDA margin came above our estimate at 13.1% (+210bps) due to superior product mix and improving internal efficiency. We expect margin expansion to continue in the coming quarter. Despite weak industry growth, increase business with existing customers owing to supplier consolidation and shifting the production...

Growth strategy for India, consolidation in EU to drive RoNA expansion Mahindra CIE (MACA)'s strong operating performance in 1QCY21 was driven by strong performances from the India and EU businesses, with decline achieved in the breakeven point in CY20. We upgrade our CY21E/CY22E EPS estimate by 26%/11%, factoring in...

MCIE's consolidated revenue and EBITDA came below our expectation Sales drops 66%YoY below break even point due to Covid-19 impact, which was heavily affected by the lockdown in April & May month. EBITDA margin came at INR 63cr(-13.1%). However, to control the fixed cost at current level restructuring action plan already launched. Despite weak sales, increase business with existing customers owing to supplier consolidation and acquired new customers on the urge to move away from the Chinese suppliers....

The European operation were mainly impacted by the weakness in the EU-CV market. (Production volume declined by 58%YoY). Despite weak sales, new product contribution stands at 20% of overall sales and company has diversified its customer base with acquisition and 75% of all new business are non Mahindra in CY19. Current order backlog from Europe and BS-6 enabled launches by key domestic customers in FY21, hopeful to drive revenue growth . The near term headwinds, due to lower visibility in growth both in...

MCI's strategy is centred on lowering breakeven points to maintain and improve margins once volume support revives. Some of its initiatives designed to support margins, cash and working capital levels during these times include: (a) restructuring German CV business activities, (b) strengthening Europe margins, (c) curtailment of all unnecessary capex, (d) review of all cost heads including employee costs, (e) enhanced insourcing and (f) drawing down of inventories. These directionally positive steps are seen being tempered by limited operating leverage benefits amid muted...

Impact of COVID-19 further hurts performance, worst to come in 2QCY20 Mahindra CIE's (MACA) 1QCY20 operating performance was in line as the India business surprised positively; on the other hand, the EU business was below estimates. Impact of COVID-19 is expected to delay the benefits of MACA's efforts to diversify the India business and cost cutting. We downgrade our CY20/CY21E EPS by ~56%/6% to factor in the impact of COVID-19 in India and EU, as well as the Fx loss in CY20E. Maintain Buy with TP of INR109 (~10x Dec'21 EPS) due to very cheap valuations....

Business de-risking in progress to combat soft demand Demand worries continued to weigh on MCI prospects both in India and in Europe. Domestically, while the PV and UV segment have witnessed lower decline than other segments, the CV space continues to remain under stress in particular. M&M;, Tata Motors, Maruti Suzuki, Hero MotoCorp and Bajaj Auto combined form >50% of MCI's India business. The company's India business ex-AEL de-grew 12% YoY in CY19 against blended ~6% fall in volumes at these key clients, highlighting slowing of previous trend of MCI...

27 February 2020 MACAs 4QCY19 operating performance was weak across operating parameters owing to a sharp fall in EU business revenue. We downgrade our CY20/21 EPS estimate by ~8%/3% to factor in the weakness in the EU business. Maintain with a target price of ~INR191 (~12x Dec21 EPS) due to cheap valuations. India business grew at ~6% driven by consolidation of AEL. substantially higher tax provisioning (both in India and EU) resulted in ~87% For CY19, revenue/EBITDA/adj. revenue grew ~6% driven by consolidation of AEL (organic decline of ~12%). India business EBITDA margin contracted ~100bp YoY to ~11.7%, translating into a PBT decline of ~22% to ~INR578. revenue declined ~27% YoY in INR terms and ~23% in EUR terms, impacted by de-growth in the commercial and off-road vehicle markets. EU EBITDA margin shrank ~150bp YoY to 12.1%, but was up ~100bp sequentially driven by restructuring initiatives.