Shares of CIE Automotive (formerly Mahindra CIE Automotive) have gone down close to 10% this month, just today the stock has slumped over 5% as its results for the September quarter missed all estimates. However, analysts are still optimistic about the stock’s path forward.
The CIE Automotive Analysts: Piyush Parag for Nuvama maintained the “buy” rating for the stock with a price target of ₹710. The price indicates an around 60% upside from the stock’s current market price of around ₹444.
Aditya Welekar-led analyst team for Axis Securities also maintained the “buy” rating for the stock with a target price of ₹585.
The CIE Automotive Thesis: Both the brokerage firms acknowledged that the company’s September quarter results were disappointing. Axis Securities in their research note said that the company’s Q2 results missed estimates on all counts (revenue, profits and EBITDA). Nuvama also said that the company failed to meet its EBITDA and profit estimates by 3.3% and 7.4%.
| Particulars | July-September | QoQ (%) | YoY (%) | Axis Est. | Nuvama Est. |
|---|---|---|---|---|---|
| Net Sales | 2,279 | -1.8% | 2.2% | 2,397 | 2,274 |
| EBITDA | 345 | -6.8% | 17.7% | 384 | 357 |
| EBITDA Margin | 15.2% | -81 bps | 199 bps | 16.0% | 15.7% |
| Net Profit | 187 | -12.6% | 11.5% | 225 | 202 |
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However, despite the lacklustre performance, both brokerage firms still believe strongly in the company’s growth prospects. Axis Securities listed four reasons behind its thesis:
- Strong operational performance and a strategic focus on expanding electric vehicle (EV) Product Portfolio.
- A robust order book Position and consistent growth in Indian operations.
- Healthy free cash flow (FCF) generation and minimal debt on the balance sheet.
- Capacity expansion to meet the growing demand from Indian original equipment manufacturers (OEMs).
Nuvama noted that the company’s management is committed to surpassing industry growth rates by 5–10%. Their strategic focus lies in producing value-added products, leveraging synergies between different divisions, and harnessing technological support from their parent company. The analyst at Nuvama expects improved profit margins due to value-added projects, new initiatives, and operational efficiencies.
Nuvama estimates a 22% compound annual growth rate (CAGR) in earnings through 2022–24, resulting in an earnings per share (EPS) of ₹28.4 in 2024, up from ₹17.8 in 2022.
Price Action: CIE Automotive’s share price was down 5.14% to trade at ₹442.25 in early trade on Friday.
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