Buy Mahindra CIE; target of Rs 270: Axis Direct

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Axis Direct's research report on Mahindra CIE

Q2CY17 results were 6% ahead of estimates at operational level driven by margin improvement in Bill Forge (BFL) and Europe. Consolidated EBITDA margin at 13.2% benefitted from closure of the Jeco (Germany) plant and merger of Bill Forge.The management maintained its guidance of further improvement in profitability to global CIE levels driven by superior product mix and process improvements.

Outlook

The company is focused on: (1) introducing new products and technology (aluminium, plastic); (2) increasing exports; (3) capitalizing on synergies from Bill Forge’s acquisition. We turned positive on the company after the recent acquisition of Bill Forge (a strategic fit) and the stock’s underperformance over the past 2 years. We maintain estimates and BUY rating with TP of Rs 270 (11x CY18E EV/E).

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