Mahindra CIE’s decent Indian performance offsets Europe’s weak showing in Q3. | Tech US News

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Mahindra CIE Automotive Ltd’s September quarter (Q3CY22) results are a story in two parts. While the Indian business performed well and saw a sequential revenue growth of 11.7%, revenue from the European operations declined by 9%. The company follows January to December accounting year.

The Indian business benefited from a recovery in passenger vehicle (PV) and two-wheeler production volumes. Also, the quarter saw an increase in receivables due to raw material cost pass-through. EBITDA (earnings before interest, tax, depreciation and amortization) margin rose 10 basis points (bps) sequentially to 15 percent. A basis point is 0.01%.

On the other hand, the EBITDA margin of the Europe business fell 160 bps to 10 percent in the third quarter. The metric was weighed down by higher energy costs and negative operating leverage.

Overall, consolidated EBITDA fell 3% sequentially. 331 crore and margin fell 50bps to 12.8%. “Given moderation in commodity costs and partial pass-through of energy costs, we expect margins to improve from here in both geographies,” analysts at Motilal Oswal Financial Services said in a report on October 18.

India’s business is on a strong footing driven by strong demand for PVs and commercial vehicles (CVs). The two-wheeler segment is likely to recover, which is good.

However, Europe’s outlook remains uncertain amid possible gas shortages and the risk of recession. Even so, it helps that Mahindra CIE has a strong order book. In the post-earnings call, the company said it has an agreement with most customers to pass-through 60-70% of energy cost inflation. This should help margins move forward.

Separately, Mahindra CIE faces a growing risk of electric vehicle (EV) adoption. “The company derives 25-27% of its Europe business revenue and 20% of its India business from powertrain products, which is at risk due to the shift towards EVs,” analysts at Kotak Institutional Equities said in a report. I will fall.” October 18. While its Metalcastello (off-highway segment) business has secured orders in the EV segment, the company is yet to secure significant orders in the segment for its Europe PV and CV forging business, he added.

A positive development on this front could be a key driver for the stock. As things stand, shares of Mahindra CIE are down 5% from their 52-week highs seen this month.

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