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India to remain the key growth driver

Earnings beat led by improved operational performance

* CIE Automotive India (CIEINDIA)’s consolidated PAT at INR2.1b came in ahead of our estimate of INR2b, led by better-than-expected performance in both India and Europe and favorable currency movement. Demand in India is likely to recover across segments post GST rate cuts. However, Europe's demand is likely to remain lackluster given the macro headwinds.

* The India business is expected to be the primary growth driver for the company even in CY26. CIEINDIA remains focused on sustaining profitability through operational efficiencies. The stock trades at 18.5x/16.7x CY26E/CY27E consolidated EPS and is attractive. Reiterate BUY with a TP of INR502 (premised on ~20x Sep’27E consolidated EPS).

Margin beat both in India and Europe

* CIEINDIA’s consolidated PAT at INR2.1b was above our estimate of INR2b, mainly led by better-than-expected performance in both India and Europe.

* The 3QCY25 consol. revenue grew ~11% YoY to INR23.7b (est. INR23.2b). The European business posted 18% YoY growth, led by 7% revenue growth in Euro terms over a low base and an 11% benefit from currency depreciation. The India business grew 8% YoY, led by a gradual pickup in auto demand. The 9MCY25 revenue/EBITDA/Adj. PAT stood at ~2%/-2%/-3% YoY.

* EBITDA stood at ~INR3.6b (est. INR3.3b), growing ~8% YoY. EBITDA margin came in at 15% (est. 14.1%), down 50bp YoY, flat QoQ – adjusting for restructuring at Metalcastello in 2Q. The YoY decline was primarily due to higher energy tariffs in India.

* Adj. PAT stood at INR2.1b (est. INR2b), which grew ~10% YoY.

* India business performance: Revenue grew 8% YoY to INR15.7b (est. INR15.6b). EBITDA margin marginally improved QoQ to 15.9% (est. 15.1%, up 30bp YoY). EBIT grew 7% YoY to INR2.1b.

* EU business performance: Revenue jumped 18% YoY to ~INR8b (est. ~INR7.6b), aided by currency gains, while real sales growth in euro terms stood at 7% YoY. EBITDA margins beat estimates, recording 13.2% (est. of 12.1%). However, the margin contracted 200bp YoY. PBT grew ~13% YoY for the Europe business.

* Summary of 9MCY25: Consolidated revenue grew 2% YoY to INR68b, with EBITDA down 2% YoY to INR10.3b (margin 14.7%), and PAT down 3% YoY to INR6.2b. India maintained steady growth (+6% YoY), while Europe declined 3% YoY due to weak forging demand and restructuring impact.

Highlights from the management commentary

* CIEINDIA achieved record quarterly sales, outperforming market growth, driven by strong traction in tractors and LCVs, along with the execution of new orders and steady exports. Margin pressure from energy tariff hikes was minimal and is expected to normalize with efficiency gains.

* European operations remain subdued, with low demand and EV slowdown offset by favorable exchange rates. The company is focusing on operational efficiency, hybrid component development, and potential consolidation opportunities amid industry distress.

* Recent U.S. import tariffs—25% on light vehicles and up to 50% on trucks, tractors, and off-highway components—pose a limited challenge, with only ~1% of Indian revenues at high risk.

* Management expects demand to revive in India post the GST rate cuts, with expectations of a 200-300bp rise in growth forecasts across segments. However, demand in Europe is likely to remain stagnant, with Europe LV volumes likely to largely remain at similar levels for the next three years.

Valuation and view

* Domestic demand in India is expected to revive across segments post the GST rate cut from here on. However, the European outlook remains subdued, although it appears to be stabilizing at lower levels. Thus, the Indian business is expected to be the primary growth driver for the company even in CY26.

* Some of the financial attributes unique to CIEINDIA include being net debt-free, having strict capex/inorganic expansion guidelines, generating positive FCF, and tracking an improving return trajectory.

* The company remains focused on sustaining profitability through operational efficiencies. The stock trades at 18.5x/16.7x CY26E/CY27E consolidated EPS. Reiterate BUY with a TP of INR502 (based on ~20x Sep’27E consolidated EPS).

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