Mahindra CIE Automotive Ltd (Mahindra CIE) is an automotive component supplier, formed by the alliance of CIE Automotive, a Spanish automotive component major and Mahindra & Mahindra’s (M&M) Systech division. The company is engaged in the business of manufacturing forged and machined products for automotive, agriculture, railway, mining, construction and other industries. With a presence across Latin America, Europe and India, Mahindra CIE is one of the world’s largest forgers.
Valuation and view
Following the association with CIE, Mahindra CIE emerged as a global automotive ancillary player with focus on Asian markets across all CIE’s product verticals and its global forging operations. With the synergy in terms of wider spread across geographies, broad product base under one umbrella and better technology integration – the company is expected to drive growth. We expect company’s total income to grow at a CAGR of ~13% during FY14-FY17E and also expects that the company would reap returns by the end of FY16E.
We initiate BUY rating on Mahindra CIE. At a current CMP of Rs 217.8, Mahindra CIE is currently trading at an EV/EBITDA of 14.4x FY16E and 13.1x FY17E. Considering the company’s strong fundamentals, we recommend ‘BUY’ with a target price of Rs 261.2, which implies potential upside of ~19.9% to the CMP from a 1 year perspective.