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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.
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