MOSL: MAHINDRA CIE (Buy)-Good performance in challenging environment, led by EU business
MAHINDRA CIE: Good performance in challenging environment, led by EU business
(MACA IN, Mkt Cap USD1.2b, CMP INR222, TP INR290, 31% Upside, Buy)
- 1QCY19 consol. net sales grew ~9% YoY to ~INR21.7b. EBITDA margins were stable at 13% (flat QoQ/YoY) and EBITDA grew 9% YoY to ~INR2.8b. Higher other income boosted adj. PAT at ~INR1.53b, a growth of ~16% YoY.
- India business revenue grew ~3% YoY (+4% QoQ) to INR8.4b, despite ~9% YoY production decline for key customers. PBIT margin grew 100bp YoY to 11.6% due to higher other income (adj. for which there is 40bp YoY decline).
- EU business revenue grew ~15% YoY to INR13.3b (constant currency growth of 14%), driven by strong growth at Metalcastello and Lithuania business. PBIT margin expanded ~40bp YoY (-90bp QoQ) to 9.3% due to better mix.
- Key takeaways from concall: (a) India business should recover in 2HCY19. (b) BF Mexico should see an improvement in 2QCY19 in both revenues and margins, as supplies to its second customer started from Apr'19. It should double its revenue run-rate by end-CY19 from current EUR10-12m. (c) In the EU business, it does not see material headwinds for Metalcastello and CIE Forgings, however, CV volumes (MFE Germany) should moderate in 2HCY19. (d) Aurangabad Electric (AEL) consolidation should start from 2QCY19. It is hopeful of improving its EBITDA margins from 11-11.5% in FY19 to 14-15% over the next couple of years.
Mahindra CIE Automotive Limited is an auto components supplier with presence in many technologies, which include forgings, castings, stampings, magnetic products and composites. The Company is focused on the automotive market, including cars, utility vehicles, commercial vehicles and tractors. The Company's Forgings business offers crankshafts, stub axles, forged and machined parts, front axle beams and steel pistons, flashless near nett forgings and forged steel parts; Stampings business offers sheet metal stampings, components and assemblies; Castings business offers turbocharger housings, axle and transmission parts; Magnetic Products business offers soft and hard magnets, and magnetic induction lighting; Composites business offers compounds, components, and products, and Gears business offers engine gears, timing gears, transmission gears, transmission drive shafts and crown wheel pinion. It operates in India, Italy, Spain, Lithuania, Germany and the United Kingdom.
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