Mahindra CIE Automotive - On Course Toward Better RoCE: ICICI Securities

ICICI Securities Report

Mahindra CIE Automotive Ltd. board recently expressed intent to sell off the company’s less profitable EU truck forging arm and focus on EU light vehicle electric vehicle components going ahead.

We believe the EU truck forging arm was accounting for ~20% of consolidated revenue and ~6% of Ebitda, consuming ~20% of capital employed but hardly adding anything to profit before tax. Thus selling off the entity at ~25-30% enterprise /sales would fetch ~Rs 5 billion/6 billion for Mahindra CIE and in turn reduce annual capex outflow.

We believe this would help the company invest ~€100 million in building its EV component portfolio through organic/inorganic routes and increase its profitably in the EU.

Also, with Mahindra and Mahindra Ltd. stake in Mahindra CIE reducing to less than 10% (~9% currently), Mahindra CIE board has approved renaming the entity to CIE Automotive India.

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