Mahindra CIE Automotive hosted a conference call on October 14, 2021. In the conference call the company was represented by Mr. Ander Arenaza Alvarez- CEO, Mr. K. Jayaprakash- CFO and Mr. Vikas Sinha- Sr. VP.

Key takeaways of the call

Q3 CY21 began on an optimistic note; however it was hit by semiconductor issue which may continue for few more months.

Demand sentiment remained strong in both India and Europe however;

Company expects chip shortage to have an impact on Q4 CY21.

2W domestic demand is recovering slower than expected however 2W exports are doing well.

There is a Sequential sales drop in Europe segment due to summer holidays seasonality and semiconductor shortage impact.

Despite automotive market challenging situation (Semiconductor shortage, Covid impact and Raw material and energy increases) company is showing its resilience with sustainable EBITDA margin.

Normalization of the semiconductor supply will be the key factor for the market recovery during next quarters.

Company believes all its divisions in India are on a growth path, and is expected to continue to grow going forward.

Company has won orders in electric vehicle business in both India and Europe.

Company is developing new aluminum forging, more details of which will be disclosed in future.

In Europe, electrification will be faster compared to India.

75% of total capex in concentrated in India, as there is large headroom for growth in India.

Company expects key risks to be- increase in logistic prices and semiconductor shortage.

Restructuring actions taken in previous year are supporting margin recovery.

Increase in steel price can impact margins in Q4 CY21 in short term however

Management expects EBITDA margin improvement in medium to long term.

Company expects CY22 and CY23 to be good year for Europe business, as Europe had big covid impact in CY21.

As EV will come into picture, IC engine parts will be replaced by EV related parts. So company believes EV transition is not a risk but an opportunity.

Capex guidance for CY21 was Rs 450 crore. Company has already spent approximately Rs 400 crore.

For CY22, capex will be 5% of total sales.

Margins on EV products are similar, only difference is in its complexity which is higher compared to IC engine parts.

Other Highlights

In India, MHCV sales during Q3CY21 grew by 98.7%, tractors sales grew by 16.4%, two wheelers sales fell by 6.2% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) grew by 0.2% compared to Q3CY20.

In India, MHCV sales during 9M CY21 grew by 132.6%, tractors sales grew by 49.3%, two wheelers sales grew by 28.2% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) grew by 47.3% compared to 9M FY20.

Europe Highlights

In Q3CY21, MHCV sales grew by 9.4% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) fell by 21.7% compared to Q3CY20.

In 9M CY21, MHCV sales grew by 31.5% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) grew by 9.3% compared to 9M FY20.