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Weak performance amid demand weakness

India to remain key growth driver; Europe outlook remains weak

* CIEINDIA’s 4QCY24 EBITDA/PAT of INR2.99b/INR1.8b came in below our estimates of INR3.2b/INR1.9b, due to a weak demand macro in India and Europe. With EU demand remaining uncertain, management continues to focus on driving growth in India through capacity expansion, deeper customer engagements, and leveraging its existing product and segment diversification.

* We cut our CY25/CY26 EPS estimates by 4%/11% to account for weak demand, slow order ramp-up, and lower profitability. However, CIEINDIA focuses on sustaining profitability through operational efficiencies. The stock trades at 18.1x/16.8x CY25E/CY26E consolidated EPS. Reiterate BUY with a TP of INR500 (~20x Dec’26E consolidated EPS).

Weak underlying industry demand dents profitability

* 4QCY24 consol. revenues declined ~6% YoY to INR21.1b (est. INR20.96b). Consol business declined due to weak EU market performance. CY24 revenue/EBITDA declined ~3%/5% YoY, while adj. PAT grew 3% YoY.

* EBITDA declined 9% YoY to ~INR2.99b (est. INR3.2b). EBITDA margins stood at 14.2% (est. 15.2%), down 40bp YoY/130bp QoQ. Input cost fluctuations in steel and aluminum had a minimal impact, with price trends largely stable.

* Adj. PAT grew 1% YoY to INR1.8b (est. INR1.9b).

* India business performance: Revenue declined 2% YoY to ~INR15.2b (in line). Overall business was stable with growth in line with the market. EBITDA margins lagged estimates and were down 110bp QoQ at 14.5% (est. 15.3%, down 20bp YoY).

* EU business performance: Revenue declined 22% YoY to ~INR5.9b (est. ~INR5.8b), due to low market performance in light vehicles (down 10% YoY) and especially CVs in Europe (down 37.5% YoY) and US off-road market. EBITDA margin missed our estimate and declined 190bp QoQ to 13.3% (est. 14.8%, down 120bp YoY). The margin impact was largely due to weak revenue. Restructuring activities and temporary lay-offs are ongoing to preserve margins.

* CY24 CFO/FCF declined ~36%/43% YoY.

* The board recommended a final dividend of INR7 per share for CY24 vs. INR5 per share in CY23.

Highlights from the management commentary

* India business: While order delays in certain segments like CIE Hosur and EV aluminum customers have impacted past performance, the company expects an improvement in the current year. Strong order inflows are driving additional capex plans for the Indian operations in the coming year

* Europe business and Metalcastello: The European market remains weak, with Metalcastello maintaining a revenue run rate of EUR4m per month. The company expects a recovery in 2HCY25 as demand for off-highway vehicle gears, primarily used in infrastructure and oil & gas, is anticipated to pick up in the US.

* Electrification: EV adoption in Europe has been slower than expected, with CY24 penetration at 13% and the CY29 forecast lowered to 43% (vs 56% earlier). Annual order intake is typically 15-20% of sales, with EV orders forming a significant portion, but it is facing slow conversion to sales, especially in Europe. In India, the company secured new orders worth INR10b, with ~25% EV mix.

* Balance sheet and cash flows: The company now has net cash of INR12b, up from INR8.2b YoY. Capex was INR3.9b (<5% of sales), with a focus on disciplined spending until market conditions improve. The dividend payout is proposed at INR7 per share (vs. INR5 last year).

Valuation and view

* The Indian business is projected to be the primary growth driver for the company even in CY26. However, the weak outlook for the EU business and Metalcastello is likely to weigh on the overall performance in the near term. Some of the financial attributes unique to the global ancillary player include: being net debt free, having strict capex/inorganic expansion guidelines, generating positive FCF, and tracking an improving return trajectory.

* We cut our CY25/CY26 EPS estimates by 4%/11% to account for weak demand, slow order ramp-up, and lower profitability. However, CIEINDIA remains focused on sustaining profitability through operational efficiencies. The stock trades at 18.1x/16.8x CY25E/CY26E consolidated EPS. Reiterate BUY with a TP of INR500 (~20x Dec’26E consolidated EPS).

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