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Buy Mahindra CIE Automotive; target of Rs 345: ICICI Securities

ICICI Securities is bullish on Mahindra CIE Automotive has recommended buy rating on the stock with a target price of Rs 345 in its research report dated August 27, 2022.

September 27, 2022 / 02:50 PM IST
 
 
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ICICI Securities research report on Mahindra CIE Automotive


We recently interacted with Mahindra CIE management (MACA) and following are the key takeaways: 1) company is targeting to take India revenue mix to ~60% vs 50% currently, driven by fast-growing profitable opportunities visible 2) M&M India revenue mix is now at 35%, with newly-launched SUVs pushing up per unit value-addition; 3) strong demand from PV makers (e.g. Tata Motors, M&M, Hyundai and Kia) has led to MACA adding capacity across stamping, magnetics and warm forging operations; 4) ~20%/~25% of India/EU businesses are under EV disruption risk and management is well prepared to scale up the EV parts business to combat the risks; 5) PV demand in the EU is yet to see major impact amid the current macro-issues though CV demand would get impacted 6) in EU forging operations, power cost constitutes 4% of revenue (thus, surging power cost accounted for 700-800bps of overall cost inflation, though it got partly mitigated with the passing-on of ~50-60% of the rise in electricity cost); 7) management is confident of sustaining India EBITDA margin at ~15% and take it up to ~17-18%. We expect MACA to deliver a mean FCF of ~Rs5bn p.a. in CY22ECY23E, with RoE doubling to ~15% by CY23E (from ~8% in CY21). This would deliver ~7% FCF yield on a lean balance sheet.



Outlook


Maintain BUY with a DCF-based target price of Rs345/share, implying ~14x CY23E EPS.


More Info


At 14:40 hrs Mahindra CIE Automotive was quoting at Rs 270.80, up Rs 8.75, or 3.34 percent.


It has touched an intraday high of Rs 285.00 and an intraday low of Rs 262.55.


It was trading with volumes of 8,891,503 shares, compared to its thirty day average of 78,814 shares, an increase of 11,181.68 percent.


In the previous trading session, the share closed down 0.81 percent or Rs 2.15 at Rs 262.05.


The share touched its 52-week high Rs 311.75 and 52-week low Rs 164.00 on 15 September, 2022 and 23 March, 2022, respectively.


Currently, it is trading 13.14 percent below its 52-week high and 65.12 percent above its 52-week low.


Market capitalisation stands at Rs 10,271.91 crore.


For all recommendations report, click here


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Mahindra CIE Automotive - 270922 - isc

Broker Research
first published: Sep 27, 2022 02:50 pm