Mahindra CIE Shares Climb As Analysts Raise Price Targets After July-September Earnings
Mahindra CIE Automotive shares climb nearly 10% as analysts raise prices target after July-September numbers.
Shares of Mahindra CIE Automotive Ltd. rose the most in 11 weeks as the automotive component maker's profit jumped in the quarter ended September, prompting analysts to raise price targets.
The company's net profit rose over 20% sequentially, while revenue increased 1.8%. Analysts cited the focus on electric vehicles, higher utilisation, and inexpensive valuations to offset the temporary impact due to the chip shortage on the industry.
While Mahindra CIE's Europe business is expected to be adversely impacted by the semiconductor shortage in the near-term, analysts said the long-term prospects remained attractive as Metalcastello and Bill Forge EV orders would peak in 2025.
The new orders for EVs are expected to compensate for the anticipated loss in revenue growth in the company's internal combustion engine-dependent portfolio.
Shares of Mahindra CIE rose over 9.75% in intraday trade to Rs 275 apiece. Trading volume on the stock was 12.1 times the 30-day average volume, for this time of the day.
Of the seven analysts tracking the company, six suggest 'buy' and one recommends 'sell'. The average of estimates tracked by Bloomberg implies an upside of 10.7%.
The relative strength index on the stock was at 74, suggesting it may be overbought.
Here's what brokerages had to say about Mahindra CIE:
ICICI Direct Research
Maintains 'buy' with a target price raised to Rs 330 from Rs 290 earlier, an implied upside of 31.71%.
Expect margin to improve due to higher utilisation and efficiency, valuations remain inexpensive.
Expect India business to contribute to CY20-23E net sales compound annual growth rate of 16.7%.
CY23E earnings per share seen at Rs 18 per share, return on capital employed to improve to 12% by CY22E.
India business outperformed Europe business.
Key EV order wins likely to power growth by CY25E.
Key Risks
Q3 CY21 performance affected by semiconductor shortage, especially in Europe.
Light vehicle markets in India and Europe as well as the European commercial vehicle market are being affected by the crisis.
Motilal Oswal
Maintains 'buy' with the target price raised to Rs 300 from Rs 292, an implied return of 19.74%.
Strong performance in Q3 CY21 driven by revenue trajectory in its India operations.
New orders for EVs provides support against an expected loss of revenue growth in its ICE-dependent portfolio.
Maintain our EPS estimates, despite the beat in Q3 CY21 to account for the impact due to semiconductor shortage.
Company remains optimistic about growth in India and Europe during CY2022 and CY2023, subject to semiconductor availability.
Metalcastello and Bill Forge have secured EV orders, which will peak in CY2025.
Growth story is well on track, aided by organic initiatives and cost-cutting measures.
Any significant order win or growth in EV portfolio could act as a trigger for rerating.
Key Risks
Uncertainty due to the chip shortage.
Impact of high logistics cost on exports momentum.