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CO-PRESENTING PARTNER
LIVE COVERAGE AND VIDEO PARTNERS
ICICI Securities research report on Mahindra CIE Automotive
Mahindra CIE (MACA) board recently expressed intent to sell off the company’s less profitable EU truck forging arm and focus on EU light vehicle EV components going ahead. We believe the EU truck forging arm was accounting for ~20% of consolidated revenue and ~6% of EBITDA, consuming ~20% of capital employed but hardly adding anything to PBT. Thus selling off the entity at ~25-30% EV/sales would fetch ~Rs5bn6bn for MACA and in turn reduce annual capex outflow. We believe this would help the company invest ~EUR100mn in building its EV component portfolio through organic/inorganic routes and increase its profitably in the EU. Also, with M&M stake in MACA reducing to <10% (~9% currently), MACA board has approved renaming the entity to CIE Automotive India. With M&M and TTMT PV demand being robust, increasing production capacity would only give better visibility on MACA India business growth prospects. With RoCE to cross ~15% by CY24E and the business operating at ~5% FCF/sales, we believe MACA is trading at an attractive valuation of ~11.5x CY24E earnings.
Outlook
Maintain BUY with a revised DCF-based target price of Rs466 (earlier: Rs374) implying 15x CY24E earnings. Increase in the target valuation is led by a combination of earnings roll-over and improved FCF outlook.
