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Shares of Mahindra CIE Automotive Ltd traded at a new 52-week high on Thursday as the stock climbed for a seventh straight session on exchanges. On Thursday, the stock rose as much as 2.4 percent to hit a high of Rs 359.25 on BSE. It has gained over 6 percent in the past seven days and nearly 25 percent in the past month. Interestingly, it has doubled from the June 2022 lows of Rs 175 in just around six months.

The recent rally has been fuelled by the company’s focus on the opportunity of the electrification of light vehicles in Europe after the auto industry there is seeing a rapid transition to electric vehicles.

The company’s decision to sell German forgings operations has also pushed the stock price further. Analysts believe that selling off the entity at nearly 25-30 percent EV/sales (EV here refers to enterprise value) would fetch approximately Rs 500-600 crore for Mahindra CIE and in turn, reduce its annual capex outflow. This should help the company invest around 100 million euros in building its EV (electric vehicle) component portfolio through organic/inorganic routes and increase its profitably in the European region.

Motilal Oswal last month had recommended a ‘buy’ on the stock with a target price of Rs 360. It had said that the proposed sale of Mahindra CIE’s German CV (commercial vehicle) forging operations was a positive development for the company as it would result in better financial performance (profitability improvement and debt reduction) and would also free up management’s bandwidth.

Notably, Mahindra CIE Automotive aims to achieve an Ebitda margin of over 15 percent in the near term compared with 12 percent in calendar year 2021. Ebitda refers to earnings before interest, tax, depreciation and amortisation.

First Published:Jan 12, 2023 2:21 PM IST