Shares of Mahindra CIE Automotive have risen over 90% from its May low of ₹168 a piece. Since January 1, 2022, the stock is up 36.63%, compared to a 14.79% rise in the Nifty Auto Index during the same time frame.
On December 15, the stock zoomed 9.72% after the company said that it has invested Rs. 2.42 crore in Strongsun Solar Private Limited.
The stock rallied by around 9.50% during the course of the following two days, reaching a new 52-week high of ₹344.6. At the current market price of ₹312, the stock is trading 90.76% higher than its one-year low of ₹164.
Mahindra CIE (MCI), part of the Spain-based CIE Automotive Group, is a multi-technology, multi-product automotive component supplier. The company is engaged in the business of manufacturing and supplying engine and chassis-forged components for commercial and passenger vehicles.
In its latest report, ICICI Direct Research maintained its "buy" rating on the stock with a revised target price of ₹410 apiece from an earlier price of ₹380, which reflects an upside potential of 28.16% from the stock's previous closing price.
“With volume growth on the anvil in Indian operations, sales at MCI are expected to grow at a 14.7% CAGR over CY21–24E. With volume growth on the anvil in Indian operations, sales at MCI are expected to grow at a 14.7% CAGR over CY21–24E,” said the brokerage.
With benign RM prices, negotiations with customers for pass-through of hiked cost, and operating leverage at play amid MCI’s efforts on costs efficiency, margins are seen improving to 12.8% by CY24E with the corresponding RoCE seen at 14% (optically muted due to high goodwill in B/S, RoIC at 30%), it added.
As per the regulatory filing, the company has put its forging business in Germany (wholly owned subsidiary) on the block for sale, with its holding company being empanelled to scout for buyers in this domain.
In a separate filing, the company also informed about its intention to change its name from Mahindra CEI Automotive Ltd. to CIE Automotive India Ltd.
MCI’s German forging business (Mahindra Forgings Europe AG) constituted more than 10% of its consolidated sales as of CY21 and is loss-making at the PAT level. It largely manufactured forging components for the truck segment in Europe.
MCI, in one of the earlier interactions, had indicated challenges at its German operations due to geopolitical conflict and higher energy prices but informed about no cash burn in this domain.
Selling this part of the business bodes well for MCI’s consolidated margin profile and capital efficiency matrix. MCI’s Indian business clocks steady state margins of 15% as compared to 10-12% clocked at its European operations, the brokerage highlighted.
The CIE group has also steadily increased its stake in MCI by 5% in the past 12 months, reinforcing foreign promoters' commitment to this business, the brokerage stated.
On the financial side, the net profit of the company has been growing consistently for the last four quarters. In the recent September-ending quarter, the company posted a consolidated net profit of ₹171.4 crore as against a net profit of ₹166.3 crore in a similar quarter of last fiscal.
The revenue from operations during the quarter came in at ₹2,736.9 crore, a growth of 30.44% from ₹2,098.1 crore in Q2 FY22. while the operating expenses came in higher at ₹2,406.2 crore, an increase of 32.05% YoY.
The promoters own 75 percent of the shares in the company, while foreign portfolio investors and domestic institutional investors each own 7.3 percent and 7.7 percent, respectively. Regular shareholders own 10.1 percent.
7 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.