ICICI Direct's research report on Mahindra CIE Automotive
Mahindra CIE (MCI) reported weak Q2CY20 results, with India performance a bigger dragger than Europe. Consolidated sales were down 66% YoY to Rs 736 crore, with India revenues down 71%, Europe revenues down 58%. Consolidated, standalone EBITDA was in the red amid broad-based spike in all cost heads. India, Europe EBIT margins were at -23.1%, -14.5% respectively. Standalone loss at the PAT level was at Rs 47 crore, with consolidated loss at Rs 129 crore.
Outlook
We expect sales, PAT to grow at a CAGR of -4.2%, 3%, respectively, in CY19-21E. While demand challenges remain, margin supportive efforts are encouraging. Valuing MCI at Rs 115 (i.e. 6.25x CY21E EV/EBITDA), we downgrade the stock to HOLD after a sharp run up in the stock over the past couple of months. MCI’s track record of consistent CFO generation combined with strong MNC parentage remains a comforting factor.
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