CIE Automotive Q4 Results Review - Misses Estimates; Robust Growth Story Remains Intact: Axis Securities

Axis Securities Report

CIE Automotive Ltd. reported a weak set of numbers. Q4 CY23 consolidated revenue/Ebitda/profit after tax was 4.8%/11.6%/ 8.9% below our estimates (5.2%/10.9%/14.8% below consensus estimates).

The company missed both our internal and consensus revenue estimates primarily due to a slowdown in the Europe market, a decline in the U.S. off-highway market, as well as decreased demand in the medium and heavy commercial vehicle/tractor segments in India. Consolidated Ebitda stood at Rs 327 crore (up ~12% YoY but down 5.2% QoQ), missing our estimates, largely due to higher other expenses as a percentage of sales.

CIE Automotive’s reported PAT stood at ~Rs 177 crore, (up ~12.8% YoY but down ~5.2% QoQ) and missed our estimates largely following weaker topline and higher effective tax rates.

Valuation and recommendation

We like CIE Automotive based on its strong execution capabilities and reiterate our 'Buy' rating on the company at a one-year Forward price-to-earning multiple of 24 times (unchanged) on Indian operations (aided by overall industry growth and demand-backed capacity expansions) and 10 times (unchanged) on moderate European operational earnings for CY25 EPS.

Based on this, we arrive at our SOTP-based target price of Rs 565/share (earlier Rs 585/share), implying an upside of 19% from the current market price.

Outlook

We like CIE Automotive’s growth story driven by-

1. Operational performance and focus on building an EV product portfolio,

2. Healthy orderbook position skewed towards EVs in Europe and steady growth in Indian/Mexican operations,

3. Strong free cash flow generations capabilities,

4. capacity building to meet demand from India OEMs.

The growth trajectory in Europe operations is expected to gradually recover from H2 CY24 as per the management. Keeping these factors in view, we forecast the company to post consolidated revenue/Ebitda/profit after tax compound annual growth rate of 8.2%/10.6%/15.8% over CY23-26E.

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