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13:37-39 - "The one who sows the good seed is the Son of Man," replied Jesus. "The field is the whole world. The good seed? That is the sons of the kingdom, while the weeds are the sons of the evil one. The blackguard who sowed them is the devil. The harvest is the end of this world. The reapers are angels

7 Jan 2019

STOCK MARKET--Buy Mahindra CIE Automotive; target of Rs 290: ICICI Direct--

ICICI Direct is bullish on Mahindra CIE Automotive has recommended buy rating on the stock with a target price of Rs 290 in its research report dated October 19, 2018.
Mahindra CIE’s (MCI) consolidated revenues grew ~22% YoY to Rs 1933 crore supported by new order wins, organic volume growth across businesses, higher realisation & positive exchange rate. EBITDA margins expanded 29 bps YoY to 13.5% driven by Indian operations Revenues from India [standalone + Bill Forge (BFL) + gears business] were at Rs 815 crore, up ~20% YoY (of which ~9% is constituted by its top three customers, ~4% from higher realisation & ~7% from new clients). EBITDA margins expanded 78 bps YoY to 15.2% due to cost efficiency & partly due to forex gain of Rs 9 crore in Bill Forge Mexico Revenue from Europe grew ~23% YoY to Rs 1126 crore. The growth mix was at: 10% from a positive exchange rate while the balance is a mix of new orders, higher realisation & organic growth. The stock reduction due to August holidays impacted the EBITDA margin, which contracted 16 bps YoY & 183 bps QoQ to 12.2% The board has approved the restructuring plan – 1) Merger of Bill Forge with itself and 2) transfer of investment in Mahindra Forging Europe to CIE Galfor. Further, MCI has approved the proposal to close business of Stokes Group within the next two years. Stokes reported sales & net loss at Rs 94 crore & Rs 9 crore, respectively for CY17, negative net worth & is unable to generate cash. Hence, to facilitate closure, the board has approved infusion of equity of ~Rs 120 crore in Stokes.


MCI is a multi-locational & multi-technology business with engineering capabilities & manufacturing facilities of its own and its subsidiaries globally. Its consistent focus on cost rationalisation would improve EBIT margins to ~11% & RoCE to ~17% in CY19E. We value MCI at 9x CY19E EV/EBITDA multiple thereby arriving at target of Rs 290 with BUY rating.

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