Shares of Mahindra CIE Automotive climbed 12 per cent in Friday’s trade following an in-line set of quarterly results. The auto component supplier reported a 152.63 per cent YoY jump in consolidated net profit at Rs 194.83 crore for the fourth quarter compared with Rs 77.12 crore in the same quarter last year. Revenue for the quarter rose to Rs 2,246.83 crore from Rs 1,169.24 crore in the year-ago quarter.
The company said the performance for the quarter was positive, supported by growth in India and commercial efforts in Europe to offset huge cost increases. On Friday, the stock rose 11.80 per cent to hit a 52-week high of Rs 433.15 on BSE.
Motilal Oswal noted that the December quarter was the first quarter for Mahindra CIE without MFE Germany and MACA’s numbers and that the overall performance for the quarter was in line with its estimates. The India business outperformed the European business, driven by strong domestic demand, while Europe demand showed signs of improvement, on the back of cost pass through and easing chip shortages, it said.
The brokerage believes that the moderation in commodity costs and partial pass-through of energy costs should improve margins in both geographies, as it upped its 2023 and 2024 EPS estimate for Mahindra CIE by 4 per cent and 1 per cent to reflect improvement in the EU business. The brokerage finds the stock worth Rs 450.
“Mahindra CIE once again reported resilient performance in an adverse environment with Q4 Ebitda margin at 13 per cent (flat QoQ) despite lower revenue in India and an inflated cost environment in the EU. Sequentially, India revenue was down 6 per cent vs EU revenue being up 8 per cent, resulting in largely flat consolidated revenue. We believe input commodity cost deflation and lower production QoQ by key OEM customers resulted in the sequential revenue decline. We believe production recovery at key domestic OEMs, aided by MM’s capacity enhancement and MSIL/TTMT’s new launches, should help domestic revenue scale up from current levels,” ICICI Securities said.
ICICI Securities, which has a target of Rs 466 on the stock, said there is scope for EU Ebitda margin to move to 16-17 per cent in the coming quarters, aided by rising scale.
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