On 20 February 2024, the financial services firm Axis Direct published the latest research report on CIE Automotive India shares, assigning a ‘buy’ rating to the stock. Let’s take a closer look at their recommendations for the CIE Automotive India share price target.
CIE Automotive India Share (CIEAUTO) faced a setback in Q4CY23, as the company’s consolidated Revenue/EBITDA/PAT fell short of expectations by 4.8%, 11.6%, and 8.9%, respectively, compared to estimates.
This performance lagged even further behind consensus estimates, trailing by 5.2%, 10.9%, and 14.8%, respectively. The underperformance was primarily attributed to multiple factors including a slowdown in the EU market, decreased demand in the US off-highway segment, and a dip in MHCV/Tractor segments within India.
Factors Contributing to Underperformance
In the Indian market, CIE Automotive faced challenges due to a delayed ramp-up in new electric vehicle (EV) export orders, softened steel prices, and declining production volumes in MHCV/Tractor sectors. Similarly, in the European market, the company encountered hurdles with lower production volume growth, particularly in Western Europe, coupled with delays in order fulfillment by customers.
Change in Estimates and Outlook
Post-Q4CY23, there’s been an adjustment in estimates for CY24E/CY25E, with revenue, EBITDA, and PAT expectations lowered by 3.9% to 4.4%. Despite these headwinds, the company remains optimistic about its future prospects. Management anticipates outperforming the underlying industry growth by over 5% in India, while European business is projected to gradually align with industry growth rates.
Focus on EV Business and Strategic Direction
CIEAUTO recognizes the evolving automotive landscape, particularly the shift towards electric vehicles. With a significant portion of new orders in CY23 attributed to EV components, the company is strategically positioned to benefit from this trend. This includes a focus on lightweight materials and safety components, areas where CIEAUTO has a competitive edge.
Valuation and Recommendation
Despite the near-term challenges, analysts maintain a positive outlook on CIE Automotive India Share. The current valuation stands at a 1-year forward PE multiple of 24x for Indian operations and 10x for European operations.
Based on this assessment, the stock is recommended for purchase, with a target price of Rs 565/share, indicating a potential upside of 19% from the current market price. This recommendation is underpinned by the company’s strong execution capabilities, growth potential in Indian and Mexican operations, and its healthy balance sheet.
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