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Buy Mahindra CIE Automotive: target of Rs 170: ICICI Direct

ICICI Direct is bullish on Mahindra CIE Automotive recommended buy rating on the stock with a target price of Rs 170 in its research report dated October 22, 2020.
Oct 22, 2020 / 02:27 PM IST
 
 
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ICICI Direct's research report on Mahindra CIE Automotive


Mahindra CIE Automotive (MCI) reported a muted operational performance in Q3CY20. Standalone numbers were steady but consolidated performance was impacted by weakness in Europe. Standalone sales were down 5.4% YoY to Rs 621 crore with consolidated sales down 9.3%, dragged by 12.3% drop in Europe. Standalone margins rose 44 bps YoY to 11.2% tracking gross margin improvement. Europe EBIT margins fell 225 bps YoY to 5.4% with India margins stable at 7.8%. Consolidated margins were down 230 bps YoY to 8.9%, which includes one-time restructuring costs at MCI Europe. Consolidated PAT for the quarter was at Rs 61 crore supported by higher other income with standalone PAT at Rs 29 crore.


Outlook


We value MCI at Rs 170 (i.e. 6.5x CY22E EV/EBITDA) and upgrade the stock to BUY. The company’s strong parentage and excellent cash generation track record remain long term positive drivers. With limited capex spend, going forward, its present CFO, FCF yield is at ~8%, 5%, respectively, offering high margin of safety.


For all recommendations report, click here


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first published: Oct 22, 2020 02:27 pm

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