Mahindra CIE share price closed at Rs 198.50/share on Friday, June 10, 2022, up 0.69%. The stock performed well the previous week with positive returns of 2.22%. However, over the years, his returns on investment have not been as outstanding as last week. In 1 month it gave a negative return of 0.55%, in 1 year gave a negative return of 9.66%, in 3 years gave a negative return of 18.31% and in 5 years gave a negative return of 18.31%.
The company has a market capitalization of Rs 7,525 crore. Its P/E ratio is 13.84, while the sector P/E ratio is 41.17. The stock is trading at Rs 34.55 higher than its 52-week low of Rs 163.50/share. While it trades at Rs 130.5/share below its 52-week high of Rs 312/share. Based on the CMP and the estimated target price of Rs 236/share, the share price could jump 20% over the next 12 months.
New business from major OEMs in Europe and the United States outpaced industry growth. The current order book remains solid until October. Growth in the Metal Castello business continues to outperform. Similarly, the strong performance of Mahindra & Mahindra and Tata Motors are driving business growth in India. Additionally, post covid, the company is planning for significant vendor consolidation with regards to delivery times and Mahindra CIE holds a successful track record with its client during this crisis. The transition to India from China as an export hub has grown tremendously. The company aims to improve the export mix from the current 12% to 25% in the next 2-3 years.
Solid performance across the segment
Consolidated revenue for Mahindra CIE was -18.2% year-on-year driven by strong growth from operations in India and Europe. Therefore. The MCIE business posted sequential sales growth of 25.4% quarter-on-quarter. Despite the shortage of semiconductors, the European commercial margin stood at 10.2% in T/T (+110bp). The EBITDA margin of the Indian business showed a considerable improvement of +300 basis points quarter-on-quarter, thanks to solid order intake from its main customers. We expect the company’s improving margin trend to continue on a year-over-year basis in the coming quarters due to a weaker base and should benefit from the past restructuring exercise. We expect revenue to increase 14% CAGR from the CY21-23 estimate, respectively.
Margin to be developed thanks to the rationalization of costs
“We expect the EBITDA margin to increase to 13% by CY23, driven by superior product mix, improved productivity and product streamlining in the Mahindra Forging Europe business. , the restructuring in Germany to concentrate more profitable products is on track.We believe that the improvement in the performance of new products, especially in the share of electric vehicles and the recovery in demand for European cars will lead to better medium-term asset utilization,” the brokerage firm said.
Buy for a target price of Rs 236/share
Mahindra CIE has a strong balance sheet position with a D/E ratio of 0.3% and positive cash flow on CY21. The brokerage said: “We believe the large supply disruption has been priced in and expects a recovery on a QoQ basis. We are raising our CY22 revenue estimate slightly by 5% due to the strong recovery expected from its key customers, both in the domestic and European businesses.Given the growth potential and the inexpensive valuation, we shift our estimate to CY23 and value MCIE at EPS of 12xCY23E and arrive at a target price of Rs236 and maintain our buy rating.
About – Mahindra CIE Automotive Ltd
Mahindra CIE is a multi-technology automotive component supplier listed on the Mumbai Stock Exchange. Mahindra CIE is one of the world’s leading forging players with a strong presence in Europe and India. Currently, 2/3 of revenues come from Europe, while the rest comes from India. The company is a subsidiary of the Spanish group CIE Automotive; an industrial group specializing in the supply of components and subassemblies for the automotive market, present worldwide and listed on the Madrid Stock Exchange.