Mahindra CIE Automotive hosted a conference call on April 26, 2022. 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

Company recorded 15% sales growth in India business on YoY basis mainly based on raw material price increase.

Company recorded Strong sales growth of around 22% on YoY basis mainly due to steel price increase, passed through without margin.

In Europe, managing steep increases in steel and energy prices is key focus area for the company. The ongoing war situation in Ukraine is also driving up raw material and fuel costs further.

EBITDA margin was negatively affected by energy price increases and general inflation in Europe. Company was able to pass through energy cost to few clients (approx one third of energy cost passed to customers). Negotiations are ongoing with other main customers for pass through.

Company witnessed sequential margin improvement based on good performance in India.

Company is focused on maintaining the momentum in uncertain environment through continuous improvements in internal processes.

The forecast in Indian market for PV production (Light Vehicles) in CY22 by IHS is 7.7% and MHCVs forecast is 7%.

The forecast in Europe market for Light Vehicles in CY22 by IHS is 3.4% and MHCV's forecast is 7.5%.

Management reiterated that, Mexico business is also performing well which is a part of India business.

In India, The long-term picture for the car market remains healthy, given the current low vehicle penetration levels and as per capita income continues to grow, it will increase the Indian household's ability to afford a car.

In India, capacity utilization is close to 100% that's why company is adding additional capacity. In Europe capacity utilization is close to 70-75%.

Management capex guidance for CY22 is around 5-6% of sales.

India Highlights

In India, despite weak 2W and tractor segments evolution in last quarter, all verticals are showing good performance and positive expectations.

In India, tractors sales during Q1 CY22 degrew by 35.3%, two wheelers sales fell by 21% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) fell by 2.2% compared to Q1 CY21.

Europe Highlights

In Q1 CY22, <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) fell by 19.1% compared to Q1 CY21.