Mahindra CIE Automotive share price: Analysts are banking on the auto component manufacturer's stock for its long-term growth prospects.
An auto parts manufacturer has grown investors' money by more than one fifth in just one month. Mahindra & Mahindra-promoted Mahindra CIE Automotive — a subsidiary of Spain-based CIE Automotive — provides a slew of products for cars, utility vehicles, commercial vehicles and tractors. It is a global forging player with a strong presence in India as well as Europe.
In three months, the stock has rewarded investors with a return of 37 percent. Yet, analysts remain upbeat on it citing the auto ancillary firm's long-term growth prospects.
They are positive on Mahindra CIE Automotive's organic initiatives and cost-cutting measures within India and Europe.
|Brokerage||Rating||Target price||CMP vs TP (%)|
|Geojit Financial Services||Buy||236||1.4|
According to Geojit, Mahindra CIE holds a strong position in its balance sheet with a debt-to-equity ratio of 0.3 percent and positive cash flow.
The debt-to-equity (D/E) ratio determines how much a company relies on debt to finance its assets relative to shareholders' equity. For instance, a company with more capital than borrowings has a low debt-to-equity ratio.
Geojit finds Mahindra CIE's valuation inexpensive given its growth potential. It expects the company's margin to continue to improve on a year-on-year basis in the coming quarters due to a lower base.
Motilal Oswal values the stock at 13 times its consolidated earnings per share (EPS).
"Any significant order wins, or growth in the EV portfolio, can act as a rerating factor," according to the brokerage.
How to pick the right auto ancillary stock
Auto component makers come in all shapes and sizes. "It would be wrong to put all auto ancillary companies in one basket. Investors must be especially careful about ones that suit only internal combustion engines (ICEs) and could get obsolete with the disruption in vehicle technologies," Tanushree Banerjee, Co-Head of Research at Equitymaster, told CNBCTV18.com.
Besides, there are players that are innovating to offer components for electric and green fuel vehicles, and then those that are agnostic to the kind of fuel used in the vehicles, she pointed out.
|Stock||Area||Return in one month||Price to earnings (TTM)|
|JBM Auto||Sheet metal parts||-0.7||32|
|Minda Corp||Security systems||-4.9||30.1|
|Minda Industries||Switching systems||2.5||134.5|
|Suprajit Engineering||Cables and lamps||-3.3||40.9|
|Varroc Engineering||Auto parts and forging||-13.1||176.3|
|ZF CV Control Systems||Braking systems||2.6||102|
"Auto ancillary stocks should also be evaluated based on their pricing power since inflation could be very detrimental to their margins," she added.