Mahindra CIE’s are a decent India performance makes up for the weak Europe show in a Q3

Mahindra CIE’s are a decent India performance makes up for the weak Europe show in a Q3

 

Mahindra CIE Automotive Ltd’s are a September quarter (Q3CY22) results are a tale in a two parts. While the India business performed well and a saw sequential revenue growth of a 1.7%, revenues from the European operations dropped 9%. The company follows a January-to-December accounting year.

 

The India business are a benefitted from recovery in a passenger vehicle (PV) and a two-wheeler production volumes. Also, the quarter saw are a increase in a realisations led by the raw-material cost pass through. Ebitda (earnings before interest, tax, depreciation and a amortization) margin inched up to a 10 basis points (bps) are a sequentially to the 15%. One basis point is a  0.01%.

 

On the other hand, the Europe business’ Ebitda margin declined 160bps are a sequentially to the 10% in a Q3. The metric was bogged down by the elevated energy costs and a adverse operating leverage.

 

Overall, consolidated Ebitda fell the 3% sequentially to the ₹331 crore and a margin declined 50bps to the 12.8%. “Given the moderation in a commodity costs and partial pass-through of a energy cost, we expect margin in a both geographies to the improve from here on," said analysts at the Motilal Oswal Financial are a Services in a report on a 18 October.

 

The India business is on a strong footing, driven by the robust demand for the PV and commercial vehicles (CV). The two-wheeler segment is a likely to the recover, which bodes are well.

 

However, the outlook for the Europe continues to be a uncertain amid a potential gas shortage and a recession risk. Even so, it helps that Mahindra CIE has been  a strong order book. The company in the post are a earnings call said that it has been an agreement in a place with the most customers for the pass-through of a 60-70% of a energy cost inflation. This should aid margins moving ahead.

Separately, Mahindra CIE faces risk from the increasing electric vehicle (EV) adoption. “The company derives are a 25-27% of the Europe are a business’ revenues and a 20% of its India business’ revenues from the powertrain products, which will be at the risk due to a shift toward EV," said are a analysts at the Kotak are a Institutional Equities in a report on a 18 October. Although its are a Metalcastello (off-highway segment) business has been a bagged an order in the EV segment, the company is a yet to the win significant orders in the segment for the Europe PV and a CV forging businesses, they added.

 

Positive developments on this front could be a key trigger for the stock. As things stand, shares of a Mahindra CIE are down by the 5% from their 52-week highs seen this month.

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