EUR 120.00 For Business Accounts Only

MOSL: MAHINDRA CIE (Buy)-Revenue beat in both India and EU; lower tax boosts profitability

MAHINDRA CIE: Revenue beat in both India and EU; lower tax boosts profitability

(MACA IN, Mkt Cap USD1.2b, CMP INR242, TP INR295, 22% Upside, Buy)

 

Optimistic about 2HCY21 for India and EU

• MACA’s strong performance in 2QCY21 was driven by strong revenue trajectory in India and the EU, and benefit of cost cutting in the EU.
• We largely maintain our EPS estimates, despite a good beat in 2Q, as we build in impact of semiconductor shortages in 2HCY21. We maintain our Buy

 Strong all round performance, led by management initiatives

• Consolidated revenue declined by 6.7% QoQ (+178% YoY) to ~INR20.4b in 2QCY21 (est. INR18.2b), led by a beat in both geographies as there was a 6% QoQ benefit of steel price pass through.
• EBITDA margin contracted by 40bp QoQ to 12.7% (est. 12.5%). EBITDA fell 9.4% QoQ (LTP YoY) to ~INR2.6b (est. INR2.3b). Lower tax restricted the PAT decline to 10.4% QoQ at INR1.36b (est. INR1.1b).
• India business revenue declined by ~16% QoQ (253% YoY) to ~INR9.3b (est. ~INR7.8b). EBITDA margin fell 150bp QoQ to 12.2% (est. 12.8%). Sales fell sharply in May’21 (30% sales drop), but Jun’21 witnessed positive sales, which reached 85% of 1QCY21 levels.