Mahindra CIE Automotive hosted a conference call on Feb 23, 2023. 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

In India, tractors sales during Q4 CY22 increased by 28.7%, two wheelers sales went up 1.2%, MHCV sales went up 4% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) went up by 18.7% compared to Q4 CY21.

In India, tractors sales in CY22 fell by 2.3%, two wheelers sales went up 3%, MHCV sales went up 27.4% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) went up by 23.5% compared to CY21.

Company won new orders in India worth more than Rs 1000 crore on a per annum basis. New EV orders won are worth more than Rs 300 crore on a per annum basis. Orders include more than 10 new customers and new platforms from existing customers.

In India, forging contributed 37% to total sales in CY22, stampings 20%, aluminum 19%, castings 12%, gears/ machining 6%, magnetics 3% and composites 3%.

Management indicated all businesses in India are performing and expects strong performance to continue in coming quarters.

Board recommended dividend of Rs 2.50 per equity share of face value of Rs 10 each for the financial year ended 31st December 2022. From CY23 management highlighted dividend distribution will be around 20-25% of PAT.

In Europe, during Q4 CY22, <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) sales increased by 6.6% and MHCV sales went down 7.6% compared to Q4 CY21.

In Europe, during CY22, <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) sales fell by 1.3% and MHCV sales fell by 0.5% compared to CY21.

In Europe, forgings contributed 78% to total revenue in CY22 and gears/machining contributed 22%.

In Q4 CY22, European business margins were positively affected as energy and inflation cost was already passed through and settled with customers. Moreover, energy prices are stabilizing after huge increases in last quarters.

European automotive market is showing recovery as semiconductor shortage is easing.

During the quarter, CIE increased stake in MCIE from 60.76% to 65.71%.

EBITDA includes a one-time impact of Rs 37.8 crore of profit on land sale.

Q4 CY22 PAT includes Rs 852.6 crore of losses coming from discontinued operations. About Rs 200 crore of positive FEFR impact (exchange rate) on CFG goodwill and net assets is pending, and to be allocated to P/L in 2023. This will be done once the CFG sale transaction is done.

India business as a percentage of total sales increased from 33% in CY16 to 64% in CY22.

In CY22, forging contributed 59% to total consolidated revenue, stampings 12%, aluminum 12%, castings 8%, gears/ machining 12%, magnetics 1% and composites 2%.

Company's growing capex for CY22 was Rs 346.5 crore, which was concentrated mainly in India and Mexico to continue business organic growth strategy. Total capex was about 5.6% of sales.

In CY22, company generated strong operative cash flow in both regions. Company generated operating cash flow equal to 73% of EBITDA.

Company installed new forging & machining line by Bill Forge to cater to EV transmission parts. AEL new plant to cater to 4W EV completed.

During the quarter, CIE Hosur commissioned a new fuel rail line, the first of its kind in India. Robotic welding capacity increased in Stampings.

Overall company delivered positive performance, supported by growth and profitability in India and big commercial efforts in Europe to offset huge cost increases (Inflation, Energy, transport).