Buy Mahindra CIE; target of Rs 274: Axis Direct

Axis Direct's research report on Mahindra CIE

Q4CY17 results were 6% ahead of estimates at operational level, as both India and Europe operations continued to deliver on both topline and EBITDA margin fronts. Consolidated EBITDA margin at 14.3% (+560 bps YoY) benefitted from price hikes received (in Europe) and merger of Bill Forge. New orders won across India and European operations will aid revenue growth.

Outlook

Management maintained guidance of further improvement in profitability to global CIE levels driven by superior product mix and process improvement. Introduction of new technologies and inorganic opportunity remain an upside. We upgrade CY18/19 estimates by 4-7% on strong operational performance and roll forward to CY19. Maintain BUY with TP of Rs 274 (9x CY19E EV/EBITDA.