Mahindra CIE - Focus On Profitability, Capital Allocation: Motilal Oswal

Motilal Oswal Report

We met the management of Mahindra CIE Automotive Ltd. to learn more about-

1. its decision to sell German commercial vehicle forging operations and its implications on operational/financials,

2. the company’s key focus areas in terms of geography and product,

3. factors leading to margin expansion in the near to medium term, and

4. focus areas in electric vehicles and details of order wins.

We believe the proposed sale of its German CV forging operations is a positive development for Mahindra CIE as it will result in a better financial performance (profitability improvement and debt reduction) and free up managements bandwidth.

Moreover, management’s focus on profitability has intensified further, as it has become selective in terms of order acceptance (to only consider orders with return on investment more than 20%) and investments in high -added products.

We believe Mahindra CIE’s growth story is on track, led by its organic initiatives (new products/customers) and merger and acquisition focus (adding new technologies).

Under CIE’s parentage, the company has been able to improve its efficiencies, cut costs, and improve profitability.

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