Mahindra CIE Q2FY18 Concall Summary

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Financial Highlights

Quarter Performance

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  • Excellent performance in terms of revenue and profitability
  •  Increase in EBITDA by 87% when compared to the same period last year
  • Increase in EBITDA margins by 1.8%
  • The growth of the divisions in India excluding Bill Forge was 21% vs 2016 3QCY17
  • Comparison with Q2CY17 has also shown an improvement in profitability
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Nine month performance

  • Nine months of MCIE growth minus Bill Forge is 15%
  • EBITDA margin without Bill Forge increased by 1% YoY; some part of this can be attributed to increase in steel prices
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Growth drivers

  • Positive market evolution across segments in India
  • Growth of key customers
  • MCIE grown higher than its key customers namely M&M, Maruti and Tata Motors both in 3Q as well as in the nine months

 Performance of Bill Forge

  • Performance in line with the expectations set during time of partnership
  • Growth of close to 20%
  • EBITDA margin of approximately 20%

European Results

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  • MCIE Europe has grown by 16% in 3Q 2017 that is approximately 22.6% growth after adjusting for currency movement
  • The 9 month growth was around 6% in rupee terms and 11% in Euro terms
  • Growth is driven by CIE Forgings and Metalcastello
  • Drop in EBITDA percentage between Q2 2017 and Q3 2017 due to stock consumption in August
  • EBITDA percentage over revenues on adding up both sales and stock variation is 12.7% in both periods

Consolidated performance

  • Net debt remains similar to the end of last calender year
  • CAPEX of Rs. 2,371 million on consolidated basis, spread across many verticals like the forging business in Spain and Lithuania, Metalcastello, Bill Forge (Both in India and Mexico), Gears and Stamping works in India etc.

 Impact of Electrical Vehicles

  •  Roughly 10% of MCIE business in India and 25% of MCIE Europe business could be affected due to Electrical Vehicles.
  • Consolidated, around 18% of the total business could be affected by EVs
  • No changes in the next two years; growth to be observed in the next 5 years; Impact on reducing revenues not expected for atleast next 10 years
  • Top automotive customers like BMW, Daimler, Volkswagen, Audi etc are likely to move towards hybrid vehicles instead of a fully-fledged Battery car

 European plant highlights

  •  Metalcastello plant – Awarded a project worth €15 million turnover per yer by Caterpillar
  • Lithuania – Supply of crankshafts to Volkswagen worth €5-6 million
  • Galfor company in Galicia supply crankshaft to several customers
  • Organic revenue growth in Germany in MFE was close to 8%
  • CapEx for Volkswagen line in Lithuania around €4 million; Peak Revenue : €8 million - €9 million