Mahindra CIE  - Embarking on Profitable Growth

Strong Q2-CY18 Perf. By Mahindra CIE - Maintain Buy Investment Thesis

MAHINDRA CIE – Strong Optg Performance Across Stdalone & Subs in Q1-CY18, Results Ahead of Est.

India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

Mahindra Cie Automotive / Equity Bottom-Up

<ul class="">
<li>In 3QCY18, <a href="https://www.smartkarma.com/entities/15280" target="_blank" data-smartkarma-citation="entities:15280:1">Mahindra Cie Automotive (MACA IN)</a> Mahindra CIE reported consolidated revenue growth of 23% YoY to Rs 19,300 mn (-2% QoQ), EBITDA growth of 25% YoY to Rs 2,610 mn (-10% QoQ) and EBT growth of 38% YoY to Rs 1,856 mn (-4% QoQ).</li>
<li>India business revenues grew by 20% YoY to Rs 8,153 mn (+2% QoQ) and EBITDA grew by 26% YoY to Rs 1,240 (-1%QoQ). Europe business revenues grew by 26% YoY to Rs 11,263 mn (-3% QoQ) and EBITDA grew by 22% YoY to Rs 1,369 mn (-17% QoQ).</li>
<li>In 3QCY18, Consolidated EBITDA margins declined by 120bps QoQ to 13.5% from 14.7% in Q2CY18. The Europe business EBITDA margins were impacted due to new WLTP (Worldwide Harmonised Light Vehicle Test Procedure) emissions testing standards and stock reduction on account of the annual August holiday period in Europe.</li>
<li>In 3QCY18, the consolidated PBT increased by 38% YoY from Rs 1,347 to Rs 1,856 mn (-4% QoQ). Interest expenses stood at Rs 62 mn in 3QCY18 as against almost Rs 93 mn a year ago. </li>
<li>MACA’s net debt position as on 30th Sept-18 was Rs 7,500 mn compared to Rs 8,250 mn as on 30th Jun-18. MACA incurred Capex of Rs 4,215 mn till 30th Sept-2018.The interest expenses were Rs 62 mn in 3QCY18 as against Rs 93 mn a year ago.</li>
</ul>
Our fair value estimate of MACA for the next twelve months comes to Rs 390/- (No Change) due to rollover of the quarter. We value MACA at 20x based on expected earnings for the year ending Sep 20E.
<table class="table table-striped">
<tbody>
<tr>
<td>
 
</td>
<td style="text-align: right;">
CY17
</td>
<td style="text-align: right;">
CY18E
</td>
<td style="text-align: right;">
CY19E
</td>
<td style="text-align: right;">
CY20E
</td>
</tr>
<tr>
<td>
PE (x)
</td>
<td style="text-align: right;">
         28
</td>
<td style="text-align: right;">
         19
</td>
<td style="text-align: right;">
         16
</td>
<td style="text-align: right;">
          13
</td>
</tr>
<tr>
<td>
ROE
</td>
<td style="text-align: right;">
10%
</td>
<td style="text-align: right;">
13%
</td>
<td style="text-align: right;">
13%
</td>
<td style="text-align: right;">
13%
</td>
</tr>
<tr>
<td>
ROCE
</td>
<td style="text-align: right;">
11%
</td>
<td style="text-align: right;">
15%
</td>
<td style="text-align: right;">
16%
</td>
<td style="text-align: right;">
17%
</td>
</tr>
</tbody>
</table>
<div class="content-caption">
 Source: Trivikram Consultants Research (PE based on the close price of MACA as of 23rd  October 2018)
</div>


In 3QCY18, Mahindra Cie Automotive (MACA IN) Mahindra CIE reported consolidated revenue growth of 23% YoY to Rs 19,300 mn (-2% QoQ), EBITDA growth of 25% YoY to Rs 2,610 mn (-10% QoQ) and EBT growth of 38% YoY to Rs 1,856 mn (-4% QoQ).
India business revenues grew by 20% YoY to Rs 8,153 mn (+2% QoQ) and EBITDA grew by 26% YoY to Rs 1,240 (-1%QoQ). Europe business revenues grew by 26% YoY to Rs 11,263 mn (-3% QoQ) and EBITDA grew by 22% YoY to Rs 1,369 mn (-17% QoQ).
In 3QCY18, Consolidated EBITDA margins declined by 120bps QoQ to 13.5% from 14.7% in Q2CY18. The Europe business EBITDA margins were impacted due to new WLTP (Worldwide Harmonised Light Vehicle Test Procedure) emissions testing standards and stock reduction on account of the annual August holiday period in Europe.
In 3QCY18, the consolidated PBT increased by 38% YoY from Rs 1,347 to Rs 1,856 mn (-4% QoQ). Interest expenses stood at Rs 62 mn in 3QCY18 as against almost Rs 93 mn a year ago. 
MACA’s net debt position as on 30th Sept-18 was Rs 7,500 mn compared to Rs 8,250 mn as on 30th Jun-18. MACA incurred Capex of Rs 4,215 mn till 30th Sept-2018.The interest expenses were Rs 62 mn in 3QCY18 as against Rs 93 mn a year ago.

Our fair value estimate of MACA for the next twelve months comes to Rs 390/- (No Change) due to rollover of the quarter. We value MACA at 20x based on expected earnings for the year ending Sep 20E.




 


CY17


CY18E


CY19E


CY20E




PE (x)


         28


         19


         16


          13




ROE


10%


13%


13%


13%




ROCE


11%


15%


16%


17%





 Source: Trivikram Consultants Research (PE based on the close price of MACA as of 23rd  October 2018)


Mahindra CIE 3QCY18 Result – Strong Revenue Growth, Temporary Challenges in Europe