CIE Automotive India Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from CIE Automotive India Ltd (CIEINDIA) Q3 FY24 Earnings Concall

• Financial Performance
  • India operations achieved 16.5% EBITDA margin in Q4 CY’23, up 15.7% YoY.
  • European operations reported 16.9% EBITDA margin, improving from 14.5% YoY.
  • Consolidated sales grew 3% year-on-year, while EBITDA and EBIT remained roughly flat.
  • India operations saw 5% sales growth in CY’23.
  • In CY’23 European operations reported 10% sales growth, in line with market growth.
  • Consolidated sales grew 7%, with EBITDA margin at 17.1%.
  • Recurrent consolidated PAT grew 18.4%, outpacing the 7% sales growth for CY’23.
• EV Strategy
  • Electric vehicles gaining traction globally due to climate change concerns.
  • CIE has developed a comprehensive EV strategy and product selection across four categories.
  • Products focused on addressing the EV market opportunity.
• India Growth Outlook
  • CIE aims to grow 5% higher than weighted average Indian auto market.
  • This target was missed in recent quarters due to delayed EV ramp-ups and other factors.
  • Management expects to get back to 5%+ growth target with some delay over next 1-2 quarters.
  • India growth was impacted by delays in ramping up major EV and export projects, especially at Bill Forge.
  • Transition from old to new models at key customer M&M affecting volumes.
  • Lower steel prices year-over-year reducing revenue growth.
• India Export Outlook
  • Exports were 14% of India revenues in 2022.
  • Expect export share to increase going forward in casting, gears and forgings.
  • Geo-political issues and logistics bottlenecks tempering export demand.
  • Projects delayed by customers due to their own bottlenecks.
  • CIE plants ready from capacity and capability perspective.
  • Customers indicate delays are temporary and volumes will come.
• Customer Portfolio
  • 50+ customers contributing over INR 50 million each.
  • Aim to grow emerging customers to improve mix over time.
  • Anchor customers provide stability while portfolio drives growth.
• Export Focus Areas
  • Targeting increase in exports from India operations.
  • Export share was 14% of India revenues in 2022.
  • Seeing opportunities in castings, forgings and gears.
  • But localization and logistics issues to navigate.
  • Largely new business rather than shifting CIE Europe work.
  • CIE Europe itself operates at high margins already.
• Margins Outlook
  • Targeting continued margin expansion in India.
  • Currently at ~17% EBITDA margins in both India & Europe.
  • Benchmarking against wider CIE group margins.
  • Aiming to close gap to CIE benchmarks over next 2-3 years.
• Margins and Profitability
  • Underwhelmed a bit on growth in 2022.
  • 20%+ RONA at consolidated level in 2022.
• EV Outlook
  • 15% of 2022 India orders electric vehicle related.
  • Much higher in Europe forgings and gears business.
  • Expecting increase with new Mahindra BORN models.
• Metalcastello Outlook
  • Hit ~EUR80 million revenues in 2022.
  • Cyclical downturn in key US market affecting volumes.
  • Run rate around EUR60 million currently.
  • Expect recovery in 2H 2023 after US elections.
• M&A Strategy and Focus Areas
  • Optimal deal size INR 600 crores to INR 1,000 crores revenue.
  • Focus on capability gaps and access to new customers.
  • Areas like aluminum, plastics, light-weighting of interest.
• Sunroof Business Update
  • Part of 2019 acquisition, runs as a separate unit Golde.
  • Centralized global business based out of Germany.
  • Managed independently within CIE.
  • No plans currently to integrate with India ops.