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.