Shares Of This Multibagger Mid Cap Stock Can Rally Up To 29%, Buy Is The Call: ICICI Direct

ICICI Direct is bullish on mid cap auto ancillaries sector stock, Mahindra CIE Automotive Limited and assigned buy call with a target price of Rs 410 apiece. The current market price of the stock is Rs 319 apiece. If you buy Mahindra CIE Automotive Limited now, you can get potential return of 28%. The analyst has given a target time of 12 months when the stock will reach the specified target price. Check key takeaways below:

1. Mahindra CIE Automotive Limited Stock Performance & Return

The last trading price of the stock is Rs 319 apiece with an intraday decline of 2.22%. The stock's 52-week high is Rs 344 apiece and 52-week low is Rs 164 apiece, respectively. The stock has given 17% return in last 3-months, 42% return in last 1-year, 100% return in last 3-years, and 28% in last 5-years.

2. Key Recent Developments

As per regulatory filing, MCI 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 10%+ of its consolidated sales as of CY21 and is loss making at the PAT level. CIE group has also steadily increased stake in MCI by ~5% in the past 12 months, reinforcing foreign promoter's commitment to this business.

3. Valuation

MCI's stock price has grown at ~5% CAGR in past five years (from ~Rs 250 in December 2017), outperforming Nifty Auto index in that time. We retain BUY tracking structural levers for improved financials, strong CFO yields (~10%) & healthy return ratios (ex-goodwill RoIC: ~30%+). 

According to ICICI Direct, Rolling over our valuations, we now value MCI at 10x CY23-24E average EV/EBITDA for a revised TP of Rs 410 (earlier TP: Rs 380)."

With volume growth on the anvil in Indian operations, sales at MCI are expected to grow at 14.7% CAGR over CY21-24E. With benign RM prices & operating leverage at play, margins are seen improving to 12.8% by CY24E, said ICICI Direct's report.

4. About Mahindra CIE Automotive

Mahindra CIE Automotive designs, manufactures, installs, and repairs automotive components. It manufactures automotive components including engine and steering components along with several other forged metal products.

Mahindra CIE (MCI), part of the Spain-based CIE Automotive Group, is a multi-technology, multi-product automotive component supplier. In India, it derives 37%, 31%, 16%, 8% of sales from PV, 2-W, tractors, M&HCV, respectively.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.