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Earnings beat led by improved operational performance

* CIE’s consol PAT at INR2b came in ahead of our estimate of INR1.9b, led by better-than-expected performance in both India and Europe and favorable currency movement.

* 2QCY25 consol. revenue grew ~3% YoY to INR23.7b (est. INR21.9b). Growth was largely led by the Indian business (+6% YoY) and positive exchange rate impact, while the EU business continued to remain subdued (-1% YoY). 1HCY25 revenue/EBITDA declined ~2%/7% YoY, while Adj. PAT declined ~8% YoY.

* EBITDA stood at ~INR3.4b (est. INR3.2b), marking ~6% YoY decline. EBITDA margin came in at 14.2% (est. 14.5%), down 150bp YoY and down 60bp QoQ. This included a 100bp impact of restructuring at Metalcastello.

* Adj. PAT stood at INR2b (est. INR1.9b), marking a ~6% YoY decline.

* Indian business performance: Revenue grew 6% YoY to INR15.2b (est. INR14.7b). India EBITDA margin remained stable QoQ at 15.7% (est. 15.5%, up 50bp YoY). EBT grew 3% YoY to INR2.1b. India remained the growth driver, outperforming market growth of ~5%.

* EU business performance: Revenue declined ~1% YoY to ~INR8.5b (est. ~INR7.2b). This was led by a 4% decline in revenue in Euro terms, 4% reduction in input costs, which was offset by a 7% benefit due to forex fluctuation. EBITDA margin contracted 240bp QoQ and 400bp YoY to 11.7% (est. 12.5%). Q2 includes a 120bp impact of restructuring cost at Metalcastello. Adjusted for this, EBITDA margin would have been 12.9%.

* 1HCY25 CFO/FCF declined ~10%/5% YoY to INR5.5b/INR4.8b. Operating cash flow was INR5.5b (~76% of EBITDA), but was offset by high working capital needs (INR5.9b) and a dividend payout of INR2.65b.

Key highlights from the presentation:

* India light vehicle forecast: IHS anticipates production growth of 5.0% in CY25 and a CAGR of 4.5% over CY2025-30.

* India MHCVs forecast: CRISIL expects the domestic MHCV industry to decline 2-4% in FY26 and post a CAGR of 2-4% over FY25-30.

* India tractor forecast: CRISIL expects the domestic tractor industry to decline 3-5% in FY26 and post a CAGR of 5-7% over FY25-30.

* India 2W forecast: CRISIL expects 7-9% growth in the domestic 2W industry in FY26 as well as a 7-9% CAGR over FY25-30.

* EU (w/o Russia) light vehicles forecast ? IHS anticipates light vehicle production to decline 2.9% in CY25 vs CY24 and post a CAGR of 1.1% over CY25-30.

* EU (w/o Russia) light vehicles forecast ? IHS anticipates MHCV production to increase 3.0% in CY25 vs CY24 and post a CAGR of 2.7% over CY25-30.

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