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Steady margin expansion for long term.

CIE Automotive India Ltd. (CIE) is the part of a Spain-based, top global forging player with a strong presence in both Europe & India. Currently, 60% of the revenue comes from India, while the rest is from Europe.

• Despite a softened demand environment, the consolidated revenue declined by a marginal 2% YoY YTD. We believe the domestic demand will pick up in H2, owing to improvement in infra spending.

• Q3CY24 revenue fell by -6.4% due to subdued growth from European business. Whereas, India business grew by 2% YoY.

• Meanwhile, EBITDA margin improved by 33bps YoY owing to lower input costs and sustained cost reduction efforts. We expect CIE to maintain a margin in the range of 15-16% in CY25 & CY26.

• Though the current order will suffice for the required growth in the near term. Global macro turbulence could delay capacity expansion from major OEMs in the EV space and gradually recover in line with industry growth.

• Increased business with existing customers owing to supplier consolidation, localization and improved content per vehicle is adding value for the company.

Outlook & Valuation

We expect CIE’s technological capability to support valuation, similar to the listed MNCs in the automotive sector. However, we lower our revenue guidance due to the softened demand environment in the European & US business and slow ramp-up in EV operation; thereby we maintain a conservative approach in earning estimates. We rollover our valuation and estimates to CY26 based on the positive long-term outlook in India (2W business) and the Mexican operation. Considering this, we recommend a BUY rating (20x CY26E EPS) with a target price of Rs.578 at CMP

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