Mahindra CIE Automotive hosted a conference call on Oct 18, 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

In India, All businesses are performing very well with positive expectations. 2W is still down,but showing recovery to certain extent.

In India, tractors sales during Q3 CY22 fell by 1.6%, two wheelers sales went up 7.7%, MHCV sales went up 17.7% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) went up by 33.1% compared to Q3 CY21.

In India, tractors sales in 9M CY22 fell by 8.6%, two wheelers sales went up 3.8%, MHCV sales went up 21% and <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) went up by 23.7% compared to 9M CY21.

In Europe, <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) sales during Q3 CY22 increased by 19.6% and MHCV sales went up 6% compared to Q3 CY21.

In Europe, <6T vehicles (include Passenger Vehicles, Utility Vehicles, Vans and Light Commercial Vehicles) sales during 9M CY22 fell by 4.2% and MHCV sales fell by 3.5% compared to 9M CY21.

In Europe, Market demand remains strong despite the uncertain market environment. However, management indicated some uncertainty ahead in Europe because of Ukrainian war impact causing potential gas shortage and recession.

In Europe, Margins were negatively affected by (1) huge energy price increase during summer months (more than 50% of increase) and (2) Commodity price increase. Energy cost impacted margin by around 1-2% even though company renegotiated some of its contracts.

Company expects to partly pass through Q3 CY22 energy price increases in coming quarters

Management expects good growth in Indian business and indicated uncertainty for European region. In Q3 CY22 India, contributed 56.41% to total sales and Europe contributed 43.59%.

Currency translation had a negative 11% YoY impact in Q3 CY22.

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

CIE further increased its stake in Mahindra CIE from 63.44% to 65.71% indicating confidence in the company.

RM positive impact was 6% in India and 15% in Europe in Q3 CY22.

During the quarter, PV and CV portfolio witnessed strong growth. Management indicated strong demand as of now but also cautioned of uncertainty related to Ukraine war.

Going forward, capex will be around 5% of total sales.