IGI Logo

Capacity Expansion to Support Medium-Term Growth Est. Vs. Actual for Q3CY26: Revenue - INLINE; EBITDA - MISS; PAT - INLINE Change in Estimates post Q3CY26 CY26E/CY27E: Revenue: 2.4%/2.4%; EBITDA: -2.7%/2.4%; PAT: -0.1%/3.9%

Recommendation Rationale

* India Growth Strong; Margins Under Pressure: CIE Automotive’s India business delivered healthy growth in Q3CY26, with revenue rising 18% YoY to Rs 1,801 Cr. EBITDA margin declined to 16.3% from 17.3% YoY due to higher energy, consumables and operating costs amid West Asia tensions. Management expects to conclude customer cost pass-throughs by year-end. Demand across two-wheelers, passenger vehicles and commercial vehicles is expected to remain healthy, although growth may moderate, while tractors remain relatively weak.

* Europe Restructuring Drives Margin Recovery: CIE Automotive’s European business continues to face subdued demand, rising Chinese imports and increasing EV penetration, with revenue declining 4% YoY in Q3CY26. However, EBITDA margin improved to 16.3% from 14.1% YoY, supported by CY25 restructuring initiatives. Management expects industry consolidation and improved cost competitiveness to support long-term profitability, although near-term growth may remain subdued.

* Order-Backed CapEx to Drive Growth: CIE Automotive is prioritising organic expansion, with India growth CapEx expected to nearly double YoY to around 8% of sales in CY26 and remain at similar levels in CY27. Investments across forgings, gears, composites, stampings, castings and aluminium are backed by existing orders, including a new 4,000 sq. m. gear facility and capacity additions. The US Ford foundry programme commenced supplies in Oct’26 and is expected to fully utilise the Urse foundry by mid-CY27, while a forging press transferred from Mexico is expected to be installed in India in Q1CY27. With Rs 970 Cr of new orders secured across Indian verticals in 9MCY26, capacity expansion is expected to support medium-term growth, while aluminium portfolio optimisation will continue until at least mid-CY27.

Company Outlook & Guidance:

Management expects healthy demand across key Indian automotive segments, with growth moderating from elevated levels. European operations remain challenging, though restructuring benefits and operational efficiency are expected to support margin resilience and long-term profitabilit

Current Valuation:

18xPE multiple on CY27E EPS (Earlier: 20x PE multiple on CY27E EPS) on Indian and 7x PE (Earlier: 8x PE multiple on CY27E EPS) on European CY27E EPS.

Current TP:

Rs 455/share (Earlier TP: Rs 485/share).

Recommendation: We maintain our BUY rating on the stock.

Financial Performance

CIE Automotive reported a healthy consolidated performance in Q3CY26, supported by strong growth in its India business. Consolidated revenue grew 11% YoY and remained largely flat QoQ, in line with our expectations. EBITDA increased 5.1% YoY but declined 4% QoQ, missing our estimates, as a favourable product mix in India and lower-than-expected raw material costs were partly offset by higher other expenses. Reported PAT stood at ~Rs 243 Cr, up 15.3% YoY and 3.4% QoQ, in line with our estimates, supported by lower interest expenses and higher other non-operating income.

Outlook

The near-term operating environment remains mixed, with subdued European automotive demand and pricing pressure persisting. However, CY25 restructuring initiatives continue to support margin recovery, while industry consolidation could create long-term market share opportunities. In India, healthy demand, Rs 970 Cr of new orders during 9MCY26 and elevated order-backed CapEx are expected to drive growth. The commencement of the US Ford foundry programme in Oct’26 and the planned ramp-up of new capacities should support medium-term earnings, while the resolution of customer cost pass-throughs by year-end could ease near-term margin pressures. Accordingly, we forecast consolidated Revenue, EBITDA and PAT CAGRs of 6%, 10% and 12%, respectively, over CY25-27E.

Valuation & Recommendation

Despite subdued demand in Europe and near-term margin pressure in India from higher operating costs, CIE Automotive continues to demonstrate resilient profitability, supported by restructuring initiatives and a diversified product portfolio. We remain constructive on the company, backed by healthy domestic demand, Rs 970 Cr of new orders secured across Indian verticals during 9MCY26, elevated orderbacked CapEx, and ramp-up of the US Ford foundry programme. Continued capacity expansion, product portfolio optimisation and improving European operational efficiency are expected to support medium-term growth and profitability.

We maintain our BUY rating on the stock, valuing the Indian business at a 18x PE multiple on CY27E EPS (Earlier: 20x PE multiple on CY27E EPS) and 7x PE (Earlier: 8x PE multiple) on European CY27E EPS. Based on this, we arrive at an SOTP-based target price of Rs 455/share (Earlier: 485/Share), implying a 25% upside from the CMP.

For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home

SEBI Registration number is INZ000161633