ICICI Direct Recommends To Buy This Automotive Stock For 32% Gain, In Near Term

Brokerage firm ICICI Direct recommended investors buy the stocks of Mahindra CIE for a 32% return. The company has declared its maiden dividend of Rs. 2.5/ share for CY21.

Target Price

The Current Market Price (CMP) of Mahindra CIE is Rs. 185. ICICI Direct has estimated a Target Price for the stock at Rs. 245. The stock is expected to offer a 32% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 185
Target Price	Rs. 245
1 year return	32.00%

Company performance

Mahindra CIE has reported muted Q4CY21 results. Consolidated net sales came in at Rs. 2,064 crore, down 1.3% QoQ, while EBITDA margins stood at 9.8%, down 300 bps QoQ. In line with that, the company's PAT was down 52% QoQ to Rs. 80 crore. CY21 Consolidated revenue was up 37% YoY at Rs. 7,946 crore, but Standalone revenues were down 4.3% QoQ to Rs. 840.8 crore, with margins down 230 bps QoQ to 11.8% amid ~376 bps gross margin decline. In CY21, the company's consolidated revenue mix was 49% from Europe, and 51% from India. Forging is ~59% of consolidated sales (86% in Europe).

Comments by ICICI Direct

According to ICICI Direct, "MCI's stock price has de-grown at ~1% CAGR in last five years, under-performing the Nifty Auto index." However, the brokerage firm has retained the buy rating for the company. ICICI Direct added, "On the back of pent-up demand in current financial year (CY22E) and limited long-term growth prospects at European operations, we expect sales at MCI to grow at a CAGR of 5.8% over CY21-23E, led by growth in India business. Efficiency efforts to report margin uptick to 11.6% by CY23E with CY23E EPS seen at ~Rs. 15.3/share with consequent RoCE at ~10% by CY23E."

About the company

Mahindra CIE is a multi-technology automotive components supplier. They are a subsidiary of the Spain-based CIE Automotive group; an industrial group specialised in supplying components and sub-assemblies for the automotive market, which has presence across the globe and is listed on the stock exchange in Madrid. MCI India operations came out stronger than European operations & management expects same track to continue, going forward. India mix is more diversified; includes 22% from aluminium, 21%- stampings & 12%- castings. In India it derives 37%, 33%, 16%, 8% of sales from PV, 2-W, tractors, M&HCV, respectively.

(Also read:  This Mid-cap Mutual Fund Ticked Above 82% Returns In Long Term: Rated By Morningstar)

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.