Financial Performance:
- Q4 CY 2024:
- India Operations: Sales grew 4% year-on-year to INR 14.5 billion, with an EBITDA margin of 17%. Growth was driven by Tractors (12%) and 2-wheelers (8%), though Light Vehicles slowed to 3.2% and Trucks saw a significant decline.
- Europe Operations: Sales dropped 21% to INR 5.8 billion due to declines in Light Vehicles, Off-Highway, and Trucks (notably a 35% drop in Q4), yet maintained a 15% EBITDA margin.
- Consolidated: Sales fell 5% to INR 20.3 billion, with EBITDA at INR 3.3 billion (down 6%).
- Full Year CY 2024:
- India Operations: Sales rose 5% to INR 58.1 billion, with an EBITDA margin of 17.9% (up from 16.7% in CY 2023), aided by a 0.7% nonrecurrent subsidy. PAT grew 20%.
- Europe Operations: Sales declined 14% to INR 28.2 billion, with an EBITDA margin of 16.1%, reflecting resilience despite market challenges. PAT was INR 2.4 billion, compared to INR 5.7 billion in CY 2023 (which included a one-off profit from discontinued operations).
- Consolidated: Sales dipped 2% to INR 86.3 billion, with an EBITDA margin of 17.3%. Adjusted PAT (excluding CY 2023 discontinued operations) grew 3.7%.
- Balance Sheet & Cash Flow: Net financial debt improved to negative INR 12 billion. Operating cash flow was 66% of EBITDA, with CAPEX at INR 3.9 billion (below 5% of sales). The Board recommended a dividend of INR 7 per share, up from INR 5.
Market Situation:
- India: The automotive market showed mixed performance, with 2-wheelers growing 16%, Light Vehicles at 3.8%, and declines in Tractors and Trucks. EV penetration is increasing gradually, supported by new model launches and government policies like PLI schemes.
- Europe: Significant declines were observed, particularly in Trucks (25.9% drop in CY 2024) and Off-Highway, with Light Vehicle production stabilizing at 16-17 million units annually (down from 20 million historically). EV penetration stagnated at 13%, with forecasts revised to 43% by 2029 (down from 56%).
Growth Strategy and Future Outlook:
- Europe Strategy: Focus on optimizing margins and adapting to lower volumes in the medium term, with expectations of a recovery in Trucks and Off-Highway in the second half of 2025, driven by U.S. policy shifts (e.g., oil/gas and infrastructure). The company aims to manage the EV transition by shifting production to aluminium forgings and EV transmission parts, despite delays in EV growth.
- India Strategy: CIE is bullish on India’s medium- and long-term growth potential, planning to offset European declines with increased capacity and efficiency improvements. Investments will target anchor customers and EV opportunities across aluminium, steel, gears, stampings, and composites for e-2/3/4-wheelers. CAPEX is expected to rise to 5-6% of turnover in 2025 to support new orders.
- Overall Outlook: The management anticipates a challenging first half of 2025 in Europe but expects a rebound later. In India, growth is prioritized to balance the portfolio, leveraging a strong order book (15-20% of sales annually, with 25% EV-related in India). The company aims to maintain EBITDA margins around 15-16% in Europe and improve slightly in India, despite market volatility and a slower EV transition globally.
Key Takeaways: CIE’s diversified model and solid financials provide resilience amid uncertainty. The focus on India’s growth, efficiency, and EV readiness, alongside margin protection in Europe, positions the company to navigate market volatility and capitalize on emerging opportunities.
Detailed Question and Answer Session (10 Questions)
- Amit Agicha (HG Hawa & Co.): What is the current order book position, and how does it compare year-on-year?
- Vikas Sinha: CIE generates orders worth 15-20% of sales annually, a consistent thumb rule, ensuring comfort in both India and Europe. The issue is slower conversion to sales, especially in Europe due to market sluggishness, particularly in EVs.
- Ander Arenaza: In India, new orders totaled INR 10,000 billion, with 25% for EVs, indicating a shift towards electrification. The portfolio is balanced, and the year was positive for order allocation, expected to convert into firm orders soon.
- Amit Agicha: What is the capacity utilization across plants in India and Europe? Any bottlenecks or idle capacities, and plans for CAPEX expansion?
- Ander Arenaza: Capacity varies by vertical—average free capacity is around 20%, but aluminium is fully booked, operating weekends. CAPEX in 2024 reinforced key verticals, and 2025 will see higher spending (5-6% of turnover) due to new orders requiring additional capacity.
- Devang Shah (Asit C Mehta): Given the European slowdown, what revenue growth trajectory do you foresee over the next 2 years? Can India compensate for Europe?
- Ander Arenaza: Europe saw an unexpectedly sharp drop, especially in Trucks (Q4: -35%) and Off-Highway, with a weak outlook for the next 2-3 quarters. A recovery is expected in the second half of 2025, driven by U.S. policies. India’s growth couldn’t offset Europe in 2024 but is the focus moving forward.
- Vikas Sinha: The strategy is to accelerate growth in India to offset Europe’s flat evolution, leveraging new orders and government support (e.g., Tesla’s entry, PLI schemes).
- Devang Shah: Can you quantify revenue growth for FY 26/27, perhaps mid-single digits?
- Ander Arenaza: No specific guidance is provided due to forward-looking uncertainties.
- Vikas Sinha: Mid-single-digit growth is reasonable but not formally forecasted.
- Devang Shah: Will margins remain in the current range?
- Vikas Sinha: The goal is to maintain 15-16% in Europe, with slight improvement in India. Europe’s margin depends on stabilizing sales, while India’s growth may temper rapid margin gains seen previously.
- Apurva Sharma (BugleRock): Any meaningful conversations with OEMs beyond top 3-4 clients for new business opportunities in passenger vehicles?
- Vikas Sinha: CIE engages with 12-15 strong clients in India, not just anchor ones (e.g., Mahindra, Bajaj). Opportunities exist across the board, despite delays in some orders, with competitive pressures managed through efficiency and reliability.
- Apurva Sharma: What’s the outlook for EV orders in India?
- Vikas Sinha: EV orders are significant (25% of India’s INR 10,000 billion order book), with delays resolving. The diversified EV portfolio (aluminium, steel, gears, etc.) positions India as an opportunity rather than a risk.
- Pratik Kothari (AMSEC): Are EV order delays in India resolving, and is order inflow strong?
- Vikas Sinha: Yes, delays with CIE Hosur and aluminium EV customers are resolving. Order inflow is robust, necessitating higher CAPEX in 2025 for India.
- Pratik Kothari: Why does India’s Q4 Truck growth show a -22.2% drop when industry data (SIAM, Fada) shows -2% to +2%?
- Vikas Sinha: The -22.2% reflects production data, including LCVs in the 6-ton category, differing from sales/registration data reported by SIAM/Fada, explaining the variance.
- Nishant Chowhan (Geojit): Why does Europe’s MHCV decline show 25.9% when ACEA reports 5-6%? Any inventory issues?
- Vikas Sinha: The 25.9% is production data excluding Russia, unlike ACEA’s registration data. Inventory levels in Europe’s MHCV supply chain will be checked and clarified separately.