Target: ₹520
CMP: ₹498.60
CIE Automotive’s (CAIL) Q4CY25 consolidated revenue at ₹2,390 crore was in line with I-Sec estimate; adjusted EBITDA margin (adjusted for new labour code impact and restructuring costs) at 15.4 per cent was about 60bps higher than I-Sec estimate.
India revenue was up 12 per cent y-o-y at about ₹1,540 crore vs. industry growth of about 20 per cent YoY. Europe revenue was up around 21 per cent y-o-y at ₹780 crore, on a low base and a favourable exchange rate impact. In near-to-medium term, CAIL expects strong growth in India business, led by improved industry outlook due to GST-reforms and ramp-up of new programmes; however, demand weakness may continue for Europe business. We expect operating leverage to drive margin improvement in India business.
The company is taking cost-cutting measures and aims to maintain margins amidst demand weakness. As a strategic move, CAIL is planning to re-locate certain forging presses and gear production units from Europe to India.
Maintain Add with a revised target price of ₹520 (vs. ₹460), based on 18x CY27E EPS.
Downside risks: Persistent sluggish demand in European market beyond CY26; and delay in ramp-up of new projects
Upside risks: Significant demand improvement in European market; and Faster-than-expected margin improvement in India business.