The Mahindra Group is a diversified Indian multinational conglomerate with interests in various industries, including automotive, aerospace, agribusiness, hospitality, and defence.
The group has nine publicly traded firms, and most of them provided remarkable returns to investors in the last year period. Among the group stocks, Mahindra CIE Automotive, an auto ancillary firm, stands out with its spectacular returns.
On Friday, the stock climbed 20% to reach an all-time high of ₹462.4 apiece after the company reported a 151% jump in its net profit to ₹195 crore in Q4CY22 as compared to ₹77.1 crore in the same quarter last year.
The revenue from operations during the quarter surged to ₹2,247 crore from ₹1,669 crore in the year-ago quarter, an increase of 34% YoY. The operating profit recorded a growth of 62.2% YoY to ₹292 crore, while the operating profit margin expanded 200 bps YoY to 13% in Q4.
The company's revenue from the India business came in at ₹1,397 crore, up 22.65% YoY, while the revenue from its Europe business rose by 50.53% to ₹849 crore during the quarter.
Management was noted that the muted two-wheeler and passenger vehicle volumes in India, attributed to the year-end effect, were impacting the business. However, the company is optimistic about the healthy momentum expected in passenger vehicles, commercial vehicles, and tractor spaces going forward.
In terms of European operations, management noted a recovery and the company benefiting from supplier consolidation.
Overall, in the financial year that ending December 31, the company recorded a net profit of ₹711 crore, up from ₹395.8 crore in CY21. The revenue from operations during the same period came in at ₹8,753 crore, a surge of 29.38% YoY.
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.
After reaching a one-year low of ₹164 apiece in May last year, the stock witnessed a one-way spike and has yielded a return of 173% thus far. In the last one year, the stock soared 138%, outperforming the Nifty Auto Index by 119.21%, which gained 18.79% over the same time frame.
Following the company's robust earnings, domestic brokerage firm ICICI Direct Research has maintained its "buy" rating on the stock with a 12-month target price of ₹500 apiece.
The brokerage maintained its bullish outlook on the stock, tracking the demand outlook, the value accretion post-selling of its German forging operations, improved financials, and strong order wins in the EV space.
"With healthy underlying demand across major clients (like M&M, Tata, and Maruti Suzuki) in Indian operations and PV-centric Europe exposure, sales at MCI are expected to grow at 12.4% CAGR over CY22–24E," said the brokerage.
"Robust order wins" occurred during the year amidst consistent efforts to de-risk the base business, with EV orders crossing the ₹3 billion (per annum basis) mark in India, it added.
Motilal Oswal, on the other hand, said the company's India business outperformed the European business in Q4, driven by strong domestic demand, while Europe's demand showed signs of improvement on the back of cost pass-through and easing chip shortages.
Given the moderation in commodity costs and partial pass-through of energy costs, the brokerage expects margins in both geographies to improve from here on.
The company's growth story is on track, driven by its organic initiatives (new products and customers in the India business). This, coupled with cost-cutting measures in both India and the EU, is expected to drive margin expansion going forward.
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.
