(MAHAUT) | 225 - ICICIdirectcontent.icicidirect.com/mailimages/IDirect_MahindraCIE_Q...MCIE Europe 1,119.9 1,126.3 958.8 16.8 1,126.3 -0.6 MCIE Europe reported a robust performance

February 22, 2019

Page | 1

February 22, 2019

ICICI Securities Ltd | Retail Equity Research

Result Update

Outperformance over industry continues…

Mahindra CIE (MCI) reported a robust Q4CY18 performance led by

healthy 220 bps QoQ margin improvement in European operations

On a consolidated basis, MCI reported sales of | 1873.3 crore, up

15.8% YoY. It included MCI India sales of | 762.7 crore, up 14.5% YoY

& MCI Europe sales of | 1119.9 crore, up 16.8% YoY

EBITDA margins at the consolidated level were at 14.7% (up 116 bps

QoQ) with MCI India reporting EBITDA margins of 14.9% (down 34 bps

QoQ) while the same at MCI Europe was at 14.4% (up 225 bps QoQ)

On a standalone basis, MCI reported a muted Q4CY18 performance.

Net sales came in at | 615 crore, up 9.5% YoY. MCI witnessed a 100

bps deterioration of EBITDA margins on a QoQ basis to 11.3%. This

coupled with impairment charge on investment led to a loss at the PAT

level (| 89.5 crore). MCI reported an exceptional loss to the tune of

| 128.6 crore towards write-offs with respect to its investment in

subsidiaries Stokes Group (| 116.1 crore, closure of business) and

Mahindra Forgings Europe AG (| 12.5 crore, sale to another subsidiary)

MCI India: exceeding growth at key clients; new launches, clients bode well

MCI India is a leading forging player in India with its contribution to MCI’s

consolidated topline at ~40%. As of CY18, forging constituted 43% of its

sales, followed by stamping (~27%), casting (~16%), gears (~7%),

magnetics (~4%) as well as composites (~3%). Top three clients at MCI

India constitute ~47% of sales. Its top clients include M&M, Maruti and Tata

Motors India (ex-MH&CV). The company has grown (21% YoY in CY18) in

excess of volume growth at its clients (weighted average 10.3% YoY),

thereby implying gain in wallet share. MCI India will also stand to gain from

the incremental model launches at its key clients. It includes Marazzo, XUV

300 as well as Alturas at M&M and Harrier at Tata Motors. Moreover, the

company will be doing forging for upcoming KIA Motors (Hyundai sister

concern) in India as well. In the EV space, it is currently supplying

composite to M&M for its EV vehicles and being considered by KIA Motors

for supplying composite for its EV vehicle slate as well. We believe this

continuous outperformance at its key clients as well as new client addition

amid adoption of new technologies bodes well for MCI. This is expected to

lead to above average industry growth for MCI India, going forward.

MCI Europe: Focus on margin improvement, steady growth prospects!

MCI Europe is a leading forging player in Europe with its contribution to

MCI’s consolidated topline at ~60%. As of CY18, CV forging constituted

45% of its sales, followed by PV forging (~43%) and gears (~12%). Top

three clients at MCI Europe constitute ~33% of sales. Its top clients include

Daimler, Renault and VW. The company witnessed volume growth of 16%

YoY in CY18 vs. PV car sales volume declining 2% in CY18 and CV sales

volume being largely flat. MCI Europe is largely operating at ~90-95% of its

capacity utilisation levels in this geography and largely focusing on

improvement in margin profile through internal efficiencies. It is likely to

witness steady growth prospects, going forward.

Healthy return ratios, ~15% earnings CAGR in CY18-20E, reiterate BUY!

MCI has successfully turned around its operations with margins in CY18 at

13.1% vs. 8% in FY15. It has also grown in excess of industry growth rates

through increasing its wallet share at its key clients. We expect this

outperformance to continue, going forward. We expect sales, PAT to grow

at a CAGR of 8.6% & 14.7%, respectively, in CY18-20E. We value MCI at

| 275 i.e. 8.5x EV/EBITDA on CY19E numbers. We have a BUY rating on the

stock. We also draw comfort from ~15% RoCE & >5% FCF yield at MCI.

Rating matrix

Rating : Buy

Target : | 275

Target Period : 12 months

Potential Upside : 22%

What’s Changed?

Target Changed from | 290 to | 275

EPS CY19E Changed from | 17.7 to | 17.0

EPS CY20E Introduced at | 19.1

Rating Unchanged

Standalone Quarterly Performance

(| Crore) Q4CY18 Q4CY17 YoY Q3CY18 QoQ

Revenues 614.9 561.5 9.5 652.4 -5.8

EBITDA 69.4 58.3 19.0 80.3 -13.5

EBITDA (%) 11.3 10.4 90 bps 12.3 -101 bps

Reported PAT -89.5 14.6 -711.0 42.5 -310.4

Key Financials

| Crore CY17 CY18P CY19E CY20E

Revenue 6,520 8,032 8,846 9,473

EBITDA 814.6 1,051.1 1,257.3 1,369.4

Net Profit 369.0 548.5 642.9 721.7

EPS (|) 9.7 14.5 17.0 19.1

Valuation summary

CY17 CY18P CY19E CY20E

P/E (x) 23.1 15.5 13.2 11.8

EV/EBITDA (x) 11.8 8.9 7.0 6.1

P/BV (x) 2.3 2.0 1.7 1.5

RoNW (%) 10.1 12.8 13.2 13.0

RoCE (%) 11.4 13.2 15.5 16.2

Stock data

Particular Amount

Market Capitalization (| Crore) | 8517.3

Total Debt (CY18) | 1613.38 Crore

Cash & Investments (CY18) | 793.9 Crore

EV | 9336.8 Crore

52 week H/L (|) 302 / 204

Equity capital (| crore) | 378.8 Crore

Face value (|) | 10

Price performance (%)

1M 3M 6M 12M

Mahindra CIE Automotive Ltd -6.1 -15.4 -11.9 2.6

Motherson Sumi Systems -18.6 -8.9 -34.2 -42.5

Bharat Forge Ltd -3.6 -20.5 -24.2 -37.6

Research Analyst

Shashank Kanodia, CFA

[email protected]

Jaimin Desai

jaimin.desai @icicisecurities.com

Mahindra CIE Automotive (MAHAUT) | 225

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis- Standalone

Q4CY18 Q4CY18E Q4CY17 YoY(%) Q3CY18 QoQ(%) Comments

Total Operating Income 614.9 645.7 561.5 9.5 652.4 -5.8

Topline came in lower than our estimates primarily tracking inventory

correction at its key clients in India

Raw Material Expenses 340.6 351.9 281.9 20.8 362.5 -6.1

Employee Expenses 72.7 72.3 75.6 -3.8 72.7 0.0

Other expenses 132.2 135.6 145.7 -9.2 137.0 -3.5 Other expenses came in higher at 21.5% of sales

Operating Profit (EBITDA) 69.4 85.9 58.3 19.0 80.3 -13.5

EBITDA Margin (%) 11.3 13.3 10.4 90 bps 12.3 -101 bps

Margins came in lower than our estimates primarily tracking higher raw

material costs as well as other overheads

Other Income 11.0 4.2 1.0 997.4 1.0 997.4

Depreciation 18.1 18.6 22.8 -20.8 18.6 -2.5

Interest 2.5 1.0 3.3 -23.1 1.0 154.9

PAT -89.5 46.2 14.6 -711.0 42.5 -310.4

PAT came in at negative | 90 crore primarily incorporating provisions for

impairment on investments made in Strokes Group, which it plans to shut

down amid a declining profitability scenario

EPS -2.4 1.2 0.4 -711.0 1.1 -310.4

Key Metrics (| crore)*

MCIE India 762.7 815.3 666.1 14.5 815.3 -6.5

MCIE India revenues came in higher due to robust performance at Bill

Forge

EBITDA Margins % 14.9 15.2 12.4 242 bps 15.2 -34 bps Margins, however, came in muted

MCIE Europe 1,119.9 1,126.3 958.8 16.8 1,126.3 -0.6

MCIE Europe reported a robust performance primarily tracking CIE's

increasing wallet share at key clients despite muted volume growth

EBITDA Margins % 14.4 12.2 15.5 -110 bps 12.2 225 bps

European operations reported a positive surprise on EBITDA margins with

EBITDA margins for the quarter coming in at 14.4%

MCIE Consolidated 1,873.3 1,932.6 1,618.4 15.8 1,932.6 -3.1

EBITDA Margins % 14.7 13.5 14.3 35 bps 13.5 116 bps

Consolidated margins outperformance was led by better-than-expected

margins in European operations

Source: Company, ICICI Direct Research; *As reported in company presentation

Change in estimates

(| Crore) Old New % change Introduced Comments

Revenue 8,359.0 8,845.6 5.8 9,472.9 Marginally upgraded CY19E numbers tracking continuous outperformance by the company in

its key Indian as well as European markets

EBITDA 1,247.9 1,257.3 0.8 1,369.4

EBITDA Margin (%) 14.9 14.2 -72 bps 14.5 Rationalised CY19E numbers and introduced CY20E numbers

PAT 668.3 642.9 -3.8 721.7

EPS (|) 17.7 17.0 -3.8 19.1 Downward revision in margins leads to downward revision in EPS estimates for CY19E.

Introduced CY20E EPS at | 19.1/share

CY19E CY20E

Source: Company, ICICI Direct Research


Company Analysis

MCI’s standalone business consists of Mahindra Forging India, casting &

magnet business, composites, stamping division while at the consolidated

level, it includes Mahindra Forging Europe, CIE’s forging business and

Mahindra’s gears. The Board of directors approved a restructuring plan in

September 2018 and merged its subsidiary i.e. Bill Forge with itself, which

earlier was a part of consolidated performance. However, it is now a part of

standalone performance. The standalone business accounts for ~33% of

overall revenue for CY18 while the remaining ~67% is from its subsidiary.

Exhibit 1: Mahindra CIE – Legal Structure

Source: Company, ICICI Direct Research.

MCI’s phase 1 (2014-17) strategy of consolidation made good progress in

areas of optimising operations, turnaround of various segments, controlling

capex and reducing debt, among others. It first targeted Mahindra Forging

Europe (MFE) as its potential turnaround candidate where its margins

significantly improved from low single digits to double digits. MCI also

discontinued its unprofitable production. However, the same will be margin

accretive, going forward. A turnaround further lifted its Metalcastello

business while CIE’s European business continues its stable operations.

MCI has embarked on its Phase 2 (2017-20) strategy, which focuses on

growth & profitability. The strategy can be broadly divided into two by a)

focusing on business development & growth [that includes organic growth,

new acquisitions (like Bill Forge – BFL), entry into new products &

customer’s development in India and optimise its utilisation and b) focusing

on profitability (through transfer of technology, improvement in efficiency

and increase exports). The first step of the second phase has already been

taken with the acquisition of Bill Forge (BFL).


Revenue growth to revive gradually

Mahindra CIE’s geography wise revenue mix is at 60:40 for outside/within

India. Segment wise, the forgings entity currently accounts for 70% of

revenue and would continue to dominate the overall pie of the consolidated

revenue. Other segments viz. stampings, gears, castings account for 11%,

10% and 7%, respectively, of revenue. The European market has decent

demand and is expected to recover gradually. The regular execution of new

orders (specifically of Caterpillar) and pick-up in sales of crankshaft from its

forging division will drive its demand from European market. Further MCI’s

growth in Europe will be higher than the overall industry, after MCI

increases its content per vehicle and will benefit from the consolidation of

vendors in Europe. MCI is well placed to cater to the global OEM against

relatively smaller regional players in Europe. However, Brexit may impact

MCI’s performance, to some extent, going forward. On a standalone

business, apart from new launches by its top two clients, its tie-up with

other domestic OEMs (viz. Maruti Suzuki, Ashok Leyland, Renault and Ford)

would support growth. Further, with growth in the domestic market

expected to remain buoyant, going forward, the revenue mix will gradually

shift as 60:40 for within/outside India. MCI will also start supplying products

to Kia Motors from 2019 onwards. Thus, we expect revenue CAGR of 8.6%

over CY18-20E to | 9,473 crore in CY20E (| 8,032 crore in CY18)

Exhibit 2: Modest revenue growth

5,570

3,861

5,320

6,520

8,032

8,846

9,473

(1.9)

(30.7)

37.8

22.6

23.2

10.1

7.1

-40

-30

-20

-10

-

10

20

30

40

50

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

FY15 CY15 CY16 CY17 CY18P CY19E CY20E

(%

)

(| crore)

Revenue % increase

Source: Company, ICICI Direct Research. All financial numbers incorporate merger assumption completed & company

has changed its accounting year from FY to CY; hence CY15 is a nine months period

Exhibit 3: Consolidated segment mix (%) – CY18

Forgings, 70.0%

Stampings, 11.0%

Gears, 10.0%

Castings, 7.0% Magnetics

Products, 1.0%

Composites, 1.0%



Exhibit 4: Revenue mix (segment, geography and product wise break up) | crore

Segment Geography Product Focus Area Customers

FY15

(12M)

CY15

(9M)

CY16

(12M)

CY17

(12M)

Forging IndiaCrankshafts, Stub

Axles

PV, UV and

Tractors

M&M, MSIL

and TML

370 275 430 459

Stamping India

Sheet metal

stamping, Component

& Assemblies

PV & UVM&M and

TML

665 482 705 844

Casting India

Turbocharger Housing,

Axles & Transmission

Parts

PV, UV,

Construction

Equipment,

Earthmoving,

Tractors &

export

M&M,

Hyundai, John

Deere, JCB,

Cummins

Turbo

411 285 406 440

Magnetic

Product

IndiaSoft & Hard Magnets,

Induction lighting

Tier 1 of PV,

UV & 2-W and

export

Denso,

Varroc, Lucas

TVS, Nippon

Electric, Bajaj

Auto

121 98 149 136

Composite IndiaCompound &

Component

Elctrical,

Switchgear,

Auto

Component

L&T

switchgear,

M&M, Volvo

Eicher

75 64 98 96

1643 1204 1787 1974

Mahindra

Forging

Europe

Europe

Forged & Machined

parts, Front Axles

beams & Steel Piston

HCV

Diamler AG,

Scania, Man,

DAF, KS,

Mahle, ZF,

KION, Linde,

AGCO

1,951 1,271 1,584 1,720

CIE

ForgingEurope

Forged steel parts for

Industrial,

Crankshafts, Common

rail, Stubs, Tulips

PV

VW, BMW,

Mercedes,

Audi, Reanult,

Fiat

1,489 1,037 1,486 1,708

Mahindra

Gears

IndiaGears (Engine, Timing,

Transmission)

PV & UV,

Tractors &

Export

M&M, Turner,

Eaton, NHFI,

Truck Tractor

CNH

138 106 159 192

Metallcast

elloEurope

Gears (Engine, Timing,

Transmission), Crown

wheel Pinion

Tractors,

Construction

Equipment,

Earthmoving,

Exports

John Deere,

Eaton CNH349 249 364 390

Bill Forge* India

2-W : Steering races

& engine valve

retainers. For PV -

constant velocity

joints, tulips, steering

shafts & yokes &

wheel hubs

2-W & PV

Hero, Bajaj,

HMSI, TVS,

Ford, GKN,

NTN,

Nexteer,

RaneNSK

NA NA 175 739

3927 2662 3768 4748

5570 3866 5555 6722Consolidated Revenue

Total Standalone Revenue

Total Subsidiary Revenue

Standalone business

Subsidiaries

Source: Company, ICICI Direct Research; All financial numbers incorporate merger assumption completed; *Bill

Forge revenue is only for the period Oct- Dec 2016 (3M)


Bill Forge acquisition = to diversify its segment + customers + reach

The BFL acquisition is helping MCI to diversify its segment, customer and

reach, thus benefiting it. MCI acquired a 100% stake in BFL for | 1331 crore,

through a mix of equity (| 1,090 crore) & cash (| 241 crore). BFL has a

presence across segments with 4W (accounting ~50% of its revenue), 2W

(~30% of revenue) and exports & 3W account for ~20% of revenue. It

exports mainly to Thailand, China, Mexico, Europe and US. BFL has key

customers viz. HMCL, BAL, HMSI, TVS, MSIL, Hyundai, Honda, Ford, etc,

with top 10 clients accounting for 72% of its revenue. Thus, the acquisition

is not only helping MCI to explore the 4W & 2W space but also diversifies its

customer concentration. Further, MCI will have a largely pan-India access

vs. past exposure, which is mainly to western India. BFL has higher

machining content thereby deriving higher value addition of its products.

EBITDA margins to rise, as CIE philosophy takes over!

Looking at the history of CIE’s acquisitions, it is evident that CIE’s

management has a very strong focus on all kinds of costs ranging from

contribution of products to corporate overheads. CIE focuses on the

decentralised management of various plants, which are independently

given targets of RoCEs and EBIT margins. The overall group turnaround is

gradually progressing. The integration of the acquired higher margin BFL

business will drive the blended margins of Indian operations while the

clean-up done in the European operations [Mahindra Forging Europe (MFE)

and Metalcastello, Italy] will drive European margins, going forward. The

EBIT margin target of ~10% of the management is now achievable. Thus,

we estimate the progression of EBITDA margins will be smooth on the way

(14.2% in CY19E and 14.5% in CY20E vs. 13.1% in CY18).

Exhibit 5: EBITDA margin to grow strongly

440

378

531 815

1,051

1,257

1,369

7.9

9.8 10.0

12.5 13.1

14.2 14.5

-

2

4

6

8

10

12

14

16

-

200

400

600

800

1,000

1,200

1,400

1,600


(%

)

(| crore)

EBITDA EBITDA Margin (%)

Source: Company, ICICI Direct Research. All financial numbers incorporate merger assumption completed &

company has changed its accounting year from FY to CY; hence CY15 is a nine months period


Large room for non-linear profit growth!

The operating and financial revival of hotspots like MFE can have a

significant impact on the profitability of the overall business. We expect this

to happen, albeit at a pace slower than that targeted by CIE’s management.

We expect profits to gallop to | 722 crore in CY20E with PAT margins

improving to 7.6%. The company has followed this path to improvement

since CY15. We may see a significant improvement in CY19E & CY20E with

PAT margins likely to come in at 7.3% & 7.6%, respectively.

Exhibit 6: Profit to start getting pumped up as operational improvement kicks in!

(78)

39.6

169

369 549

643

722

(1.4)

2.3

3.2

5.7

6.8 7.3

7.6

-2

-1

-

1

2

3

4

5

6

7

8

9

-200

-100

-

100

200

300

400

500

600

700

800


(%

)

(| crore)

PAT PAT Margin (%)




Outlook and valuation

MCI has successfully turned around its operations with EBITDA margins in

CY18 at 13.1% vs. 8% in FY15. It has also grown in excess of the industry

growth rates through increasing its wallet share at its key clients. We expect

this outperformance to continue, going forward. We expect sales, PAT to

grow at a CAGR of 8.6% & 14.7%, respectively, in CY18-20E. We value MCI

at | 275 i.e. 8.5x EV/EBITDA on CY19E numbers. We assign a BUY rating to

the stock. We also draw comfort from ~15% RoCE & >5% FCF yield at MCI.

Exhibit 7: Valuation

Pariculars

CY19E EBITDA (| crore) 1257

Implied target EV/EBITDA (x) 8.5

EV (| crore) 10687

CY19E Net Debt (| crore) 299

Mcap (| crore) 10388

No. of shares (crore) 37.9

Target Price (| per share) 275


Exhibit 8: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

CY16 5,121.3 39.3 4.5 96.0 50.4 18.3 5.4 6.9

CY17 6,254.7 22.1 9.7 118.4 23.1 11.8 10.1 11.4

CY18P 7,648.5 22.3 14.5 48.6 15.5 8.9 12.8 13.2

CY19E 8,454.9 10.5 17.0 17.2 13.2 7.0 13.2 15.5

CY20E 9,074.4 7.3 19.1 12.3 11.8 6.1 13.0 16.2




Recommended history vs. consensus estimates

0.0

20.0

40.0

60.0

80.0

100.0

0

100

200

300

400

Feb-19Nov-18Aug-18May-18Mar-18Dec-17Sep-17Jun-17Mar-17Dec-16Sep-16Jun-16Mar-16

(%

)(|)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICI Direct Research

Key events

Date Event

Jun-08 Mahindra Forging's acquisitions in Europe, including Schöneweiss, start to integrate into the business

Apr-09 The company reports annual losses on the back of sudden downturn in the European business

Oct-09 Domestic business also suffers on the back of Lehmann crisis

Nov-09 Mahindra Forgings invests in doubling installed capacity in the forgings entity in India to 80,000 MT

Mar-10 Receives best supplier awards from Volvo Eicher, Kirloskar Oil Engines

Jul-10 Company starts to report better financials compared to previous years

Sep-11 Third crankshaft machining line installed, new makino installed for tool room in die production

Sep-13 CIE Automotive Spain and M&M agree to a merger between Mahindra Systech and CIE Forgings Europe. M&M acquires 13.5% stake in CIE SPA for €6 while

retaining 20% direct ownership in new company Mahindra CIE automotive. CIE post merger will have ~51% stake in the company

Jan-14 CIE's efforts in turning around Mahindra Forgings Europe start to reflect fruitfully as MFE starts to clock ~6-8% EBITDA

Jun-14 All parties ranging from shareholders to creditors give approval to the merger. Final court approval pending

Oct-14 Management indicates completion of the merger process likely by early December

Dec-14 Merger of Mahindra CIE companies formally completed on December 10, 2014

Jul-16 To optimise the synergy within companies, the board of directors have appointed Ander Arenara Alvarez as Chief Executive Officer of MCI

Sep-16 MCI acquires Bill Forge (which is into forging capabilities) which is into 4-W, 2-W and exports markets thereby diversifying its segment, customer & geography

mix going forward. It will acquire 100% stake for | 1331 crore, through a mix of equity (value | 1,090 crore) & cash (| 241 crore).

Oct-16 The Board of Directors appoints K Jayaprakash as Chief Financial Officer of the company


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Participaciones Internacionales Autometal DOS, S. L. 31-Dec-18 56.3 213.2 0.00

2 Mahindra Group 31-Dec-18 11.4 43.3 0.00

3 Ruane, Cunniff & Goldfarb, Inc. 31-Dec-18 3.8 14.4 14.40

4 Sundaram Asset Management Company Limited 31-Dec-18 2.2 8.2 -1.49

5 Ainos Holdings Ltd. 31-Dec-18 2.1 8.0 0.00

6 Haridass (Anil) 31-Dec-18 1.5 5.6 0.00

7 UTI Asset Management Co. Ltd. 31-Dec-18 1.4 5.2 0.19

8 Haridass (Anjali Powar) 31-Dec-18 1.4 5.1 -0.60

9 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Dec-18 1.2 4.4 1.24

10 Life Insurance Corporation of India 31-Dec-18 1.2 4.4 0.00

(in %) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18

Promoter 69.9 69.8 69.8 67.8 67.7

FII 5.7 5.6 5.0 7.7 9.7

DII 7.1 7.8 8.4 4.9 7.3

Others 17.2 16.8 16.9 19.7 15.3

Source: Reuters, ICICI Direct Research

Recent Activity

Investor name Value(m$) Shares(m) Investor name Value(m$) Shares(m)

Ruane, Cunniff & Goldfarb, Inc. 53.20 14.40 Prudential Management & Services Pvt. Ltd. -18.00 -4.78

Franklin Templeton Asset Management (India) Pvt. Ltd. 4.59 1.24 IDFC Asset Management Company Private Limited -7.55 -2.11

APG Asset Management 0.93 0.25 Sundaram Asset Management Company Limited -5.51 -1.49

UTI Asset Management Co. Ltd. 0.70 0.19 Aditya Birla Sun Life AMC Limited -2.80 -0.76

Taurus Asset Management Co. Ltd. 0.08 0.02 Haridass (Anjali Powar) -2.22 -0.60

Buys Sells

Source: Reuters, ICICI Direct Research


.

Financial summary

Profit and loss statement | Crore

(Year-end March) CY17 CY18P CY19E CY20E

Total operating Income 6,520.0 8,031.5 8,845.6 9,472.9

Growth (%) 22.6 23.2 10.1 7.1

Raw Material Expenses 2,854.9 3,631.5 3,994.9 4,265.0

Employee Expenses 1,176.0 1,329.7 1,437.3 1,524.5

Other Expenses 1,674.5 2,019.2 2,156.0 2,314.0

Total Operating Expenditure 5,705.4 6,980.5 7,588.3 8,103.5

EBITDA 814.6 1,051.1 1,257.3 1,369.4

Growth (%) 53.4 29.0 19.6 8.9

Other Income 26.9 38.7 42.6 45.4

Interest 54.5 50.2 65.7 45.7

Depreciation 262.8 286.7 315.8 338.2

PBT 517.3 752.8 918.4 1,031.0

Total Tax 148.3 204.3 275.5 309.3

PAT before Minority Interest 369.0 548.5 642.9 721.7

Minority Interest 0.0 0.0 0.0 0.0

PAT after Minority Interest 369.0 548.5 642.9 721.7

EPS (|) 9.7 14.5 17.0 19.1


Cash flow statement | Crore


Profit after Tax 369.0 548.5 642.9 721.7

Add: Depreciation 262.8 286.7 315.8 338.2

(Inc)/dec in Current Assets -445.2 -73.7 -208.4 -178.1

Inc/(dec) in CL and Provisions 360.3 -54.0 176.6 154.0

CF from operating activities 601.5 757.8 992.5 1,081.4

(Inc)/dec in Investments -42.1 -5.6 -29.2 -22.5

(Inc)/dec in Fixed Assets -366.2 -402.6 -442.3 -473.6

Others -89.6 -699.6 -70.2 -77.8

CF from investing activities -497.9 -1,107.8 -541.7 -573.9

Interest Paid -54.5 -50.2 -65.7 -45.7

Inc/(dec) in loan funds -165.2 416.5 -300.0 -400.0

Dividend paid & dividend tax 0.0 0.0 -44.3 -44.3

Others 89.7 25.0 0.0 1.0

CF from financing activities -130.0 391.4 -410.0 -489.0

Net Cash flow -26.4 41.4 40.9 18.5

Opening Cash 98.1 71.7 113.1 153.9

Closing Cash 71.7 113.1 153.9 172.5


Balance sheet | Crore


Liabilities

Equity Capital 378.4 378.8 378.8 378.8

Reserve and Surplus 3,337.2 3,910.3 4,508.9 5,187.3

Total Shareholders funds 3,715.6 4,289.1 4,887.7 5,566.1

Total Debt 1,196.9 1,613.4 1,313.4 913.4

Minority Interest 0.0 0.0 0.0 0.0

Total Liabilities 5,422.7 6,416.0 6,839.0 7,151.0

Assets

Gross Block 6,172.2 6,539.1 7,017.3 7,491.0

Less: Acc Depreciation 4,258.4 4,545.1 4,860.8 5,199.0

Net Block 1,913.9 1,994.0 2,156.5 2,292.0

Capital WIP 60.2 96.0 60.0 60.0

Total Fixed Assets 1,974.1 2,090.0 2,216.5 2,352.0

Investments 55.0 680.8 860.8 960.8

Goodwill 2,836.4 2,911 2,911 2,911

Inventory 989.8 1,228.6 1,332.9 1,427.4

Debtors 598.4 741.4 811.9 869.4

Other current assets 401.6 193.7 213.3 228.5

Cash 71.7 113.1 153.9 172.5

Total Current Assets 2,061.6 2,276.8 2,512.0 2,697.8

Creditors 1,574.3 1,683.9 1,817.6 1,946.5

Provisions 19.6 44.9 60.9 65.2

Other Current Liabilities 505.2 265.4 292.3 313.0

Total Current Liabilities 2,099.1 1,994.2 2,170.8 2,324.8

Net Current Assets -37.6 282.6 341.2 373.0

Application of Funds 5,422.7 6,416.0 6,839.0 7,151.0


Key ratios


Per share data (|)

EPS 9.7 14.5 17.0 19.1

Cash EPS 16.7 22.1 25.3 28.0

BV 98.2 113.3 129.1 147.0

DPS 0.0 0.0 1.0 1.0

Cash Per Share 1.9 3.0 4.1 4.6

Operating Ratios (%)

EBITDA Margin 12.5 13.1 14.2 14.5

PAT Margin 5.7 6.8 7.3 7.6

Inventory days 55.4 55.8 55.0 55.0

Debtor days 33.5 33.7 33.5 33.5

Creditor days 88.1 76.5 75.0 75.0

Return Ratios (%)

RoE 10.1 12.8 13.2 13.0

RoCE 11.4 13.2 15.5 16.2

RoIC 26.3 25.6 28.0 28.5

Valuation Ratios (x)

P/E 23.1 15.5 13.2 11.8

EV / EBITDA 11.8 8.9 7.0 6.1

EV / Net Sales 1.5 1.2 1.0 0.9

Market Cap / Sales 1.3 1.1 1.0 0.9

Price to Book Value 2.3 2.0 1.7 1.5

Solvency Ratios

Debt/Equity 0.3 0.4 0.3 0.2

Current Ratio 1.1 1.2 1.2 1.2

Quick Ratio 0.6 0.5 0.5 0.5



ICICI Direct coverage universe (Auto & Auto Ancillary)

CMP M Cap

(|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

Amara Raja (AMARAJ) 738 700 Hold 12610 27.6 30.2 39.8 26.8 24.4 18.6 14.8 13.1 10.2 23.3 22.0 24.7 16.0 15.2 17.1

Apollo Tyre (APOTYR) 200 225 Buy 11950 12.7 14.2 22.5 16.5 14.7 9.3 6.7 6.7 5.7 7.8 9.1 11.0 7.4 9.1 11.1

Ashok Leyland (ASHLEY) 80 85 Hold 22600 5.3 6.4 7.8 15.0 12.5 10.3 7.3 6.6 5.0 28.1 28.2 31.9 21.9 23.2 24.3

Bajaj Auto (BAAUTO) 2767 2380 Hold 80074 140.6 149.7 167.2 17.8 16.7 14.9 11.9 11.3 9.3 22.9 21.1 21.7 21.5 20.3 20.2

Balkrishna Ind. (BALIND) 828 820 Hold 15825 38.2 42.5 49.8 21.4 19.3 16.4 14.2 11.6 9.5 22.4 21.0 22.4 18.1 21.0 22.4

Bharat Forge (BHAFOR) 472 535 Buy 21994 16.2 23.5 27.6 29.2 20.1 17.1 13.9 11.5 9.9 18.2 21.1 23.3 17.3 20.8 21.4

Bosch (MICO) 18066 17565 Hold 56728 449.1 545.6 622.9 40.2 33.1 29.0 25.1 22.4 18.9 14.4 14.9 15.2 21.4 22.2 22.6

Eicher Motors (EICMOT) 20488 21250 Hold 55851 718.9 848.4 1112.9 28.5 24.1 18.4 19.0 16.7 12.3 39.1 34.6 35.3 29.9 26.0 26.4

Escorts (ESCORT) 656 700 Hold 8040 28.1 40.7 44.1 23.8 16.5 15.2 14.2 10.6 9.3 18.8 20.9 20.8 13.5 16.5 15.3

Exide Industries (EXIIND) 206 235 Hold 17497 8.2 8.4 9.8 25.0 24.6 21.0 15.2 14.1 12.0 19.1 17.6 19.1 13.0 12.2 13.1

Hero Moto (HERHON) 2615 3000 Buy 52220 185.1 174.5 199.9 14.1 15.0 13.1 8.7 9.0 7.7 42.4 38.0 39.0 31.4 26.9 27.4

JK Tyre & Ind (JKIND) 85 82 Hold 1933 2.9 10.0 22.0 29.3 8.5 3.9 9.2 5.8 4.1 7.7 12.2 16.1 3.6 12.9 19.2

Mahindra CIE (MAHAUT) 225 275 Buy 8528 14.5 17.0 19.1 15.5 13.2 11.8 8.9 7.0 6.1 12.8 13.2 13.0 13.2 15.5 16.2

Maruti Suzuki (MARUTI) 6842 6000 Hold 205792 255.6 250.3 284.4 25.5 26.0 22.9 13.5 13.8 11.8 21.1 17.8 18.8 18.5 16.3 16.6

Motherson (MOTSUM) 134 125 Hold 42316 5.1 5.3 7.0 26.5 25.3 19.2 9.3 8.5 6.8 16.3 15.2 18.0 17.4 15.7 18.0

Tata Motors (TELCO) 165 145 Hold 49228 26.8 -83.4 16.6 5.6 NA 9.1 2.4 3.3 2.6 9.1 5.1 9.9 10.3 5.9 12.6

Wabco India (WABTVS) 6020 6800 Hold 11438 143.8 172.2 212.3 41.9 35.0 28.4 28.0 24.1 19.1 17.9 17.8 18.2 25.1 25.7 26.0

Sector / Company

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)



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ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Strong

Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is

defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


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Documents

(MAHAUT) | 225 - ICICIdirectcontent.icicidirect.com/mailimages/IDirect_MahindraCIE_Q...MCIE Europe 1,119.9 1,126.3 958.8 16.8 1,126.3 -0.6 MCIE Europe reported a robust performance