This Midcap Auto Stock's Revenue Grew 32.5% YoY, Buy For 27% Upside: Motilal Oswal

Reputed brokerage firm Motilal Oswal in a report suggests investors buying the stocks of Mahindra CIE. The company's consolidated revenue grew by 32.5% YoY to Rs. 27.1b. Positively, consolidated net debt declined from Rs. 2.3b QoQ to Rs. 8.7b.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of Mahindra CIE is Rs. 249. Motilal Oswal has estimated a Target Price for the stock at Rs. 315. This stock has the potential to give a 27% return, in the upcoming 1 year. This is a mid-cap stock with a market capitalization of around Rs. 9,802 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 249
Target Price	Rs. 315
Potential 1 year return	27.00%
52 week high share price	Rs. 312.00
52 week low share price	Rs. 163.95

Mahindra CIE's EBITDA/adj. PAT grew 17%/39% YoY to Rs. Rs. 3b/Rs. 1.9b, in 2QCY22, respectively. Revenue/ EBITDA/adj. PAT rose 25%/7%/21% YoY in 1HCY22, respectively. Higher other income coupled with lower interest cost and lower tax led to consolidated adj. PAT of Rs. 1.9b. India business revenue grew 47% YoY to ~Rs. 13.8b, partly supported by benefit of RM cost pass through.

Motilal Oswal: Why Should You Buy This Stock?

"Mahindra CIE's 2QCY22 operating performance was in line as strong revenue traction was offset by cost pressures. India EBITDA margin stood at 13.3% (v/s estimated 13.2%, more than 110bp YoY), driven by RM cost pass through and operating leverage. The company's India EBITDA grew 61% YoY to ~Rs. 1.84b. While 2HCY22 is likely to be better than 1H for the European business, India business is expected to gain from demand recovery in 2Ws (on a low base) and demand from M&M's SUV," Motilal Oswal said.

"We raise our CY22E/CY23E EPS by 17%/5%, respectively, to account for stronger-than-estimated revenue growth and higher other income, lower interest and lower tax for CY22E. Mahindra CIE's growth story is on track, driven by its organic initiatives (new products/ customers in the India business). This, coupled with cost-cutting measures in both India and the EU, will drive margin expansion going ahead. Any significant order wins, or growth in the EV portfolio, can act as a re-rating factor," the firm added.

Mahindra CIE: Company

Mahindra CIE is a multi-technology automotive components supplier, they are a subsidiary of the CIE Automotive group of Spain; an industrial group specialised in supplying components and subassemblies for the automotive market, which has presence across the globe and is listed on the stock exchange in Madrid. For the EU business, the 2HCY22 production schedule is strong and management expects 2H to be better than 1HCY22. While the order book shows a big increase for 2H, considering the uncertain macro environment, 2H may still be only slightly better than 1HCY22. The EU business has parked surplus cash of EUR 40m with CIE Auto and is earning interest of 1.5% p.a. On the other hand, Mahindra CIE has taken EUR 80m loan from CIE Automotive for Mexico and other businesses.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. 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.