Shares of Mahindra CIE Automotive continued gaining streak for the second straight day and rose nearly 6% in intraday trade on Friday to hit a fresh 52-week high of ₹333.90 on the BSE, in an otherwise weak broader market. The stock price breached its previous high of ₹327.90, touched on October 20, 2022, as investors cheered the company’s decision to put on block its German forging operations, which face challenges due to geo-political conflict as well as higher energy prices. In the last two sessions, the stock of the Mahindra Group company has risen 16% compared with over 2% fall in the BSE benchmark Sensex.
On Friday, Mahindra CIE Automotive share price opened marginally higher at ₹316, against the previous closing price of ₹315.2 on the BSE. During the session, the stock rallied 5.9% to touch a record high of ₹333.90, before settling at ₹326.40, up 3.5%. The market capitalisation of the midcap stock climbed to ₹12,380.92 crore.
Mahindra CIE shares have turned into multibagger in the last nine months, with share price more than doubling from its 52-week low of ₹164 on March 23, 2022. The stock of the automotive components supplier has risen 40% in a year, whereas it has surged 62% in the past six months. In the last one month, the counter added 11%, while it jumped 15% in a week.
The recent rally in Mahindra CIE shares can be attributed to decent financial performance, strong order book, and robust demand outlook for both Indian and European operations. The board decision to put its forging business in Germany on the block also boosted sentiments.
On December 14, the board of Mahindra CIE reviewed the future plans of the company’s German forging operations comprising CIE Forging Germany GmbH (CFG) and its subsidiaries and a proposal approved by the board of directors of CIE Galfor S.A. (Galfor), the immediate holding company of CFG.
“In line with this, the board took note of the proposal approved by Galfor to launch an active program to locate a buyer for the German Forging Operations comprising CIE Forging Germany GmbH and its subsidiaries,” it said in an exchange filing.
Besides, the board of directors of Galfor have authorised Galfor management to take steps toward locating a buyer. Once this contemplated transaction is finalised, the same will be taken up by the board for its consideration and approval at the relevant time, it said.
The company in one of the earlier analyst interactions had indicated challenges at its German operations due to geo-political conflict as well as higher energy prices but informed about no cash burn in this domain. “Selling this troubled part of business bodes well for the consolidated capital efficiency matrix but the price at which it can be sold could not be ascertained at this point in time. Sentimentally, this is a positive development for the company,” according to ICICIdirect Research.
The company’s German forging business constitutes around 20% (at ₹1,621 crore) of its consolidated sales as of CY21 and largely manufactured forging components for the truck segment in Europe. Galfor, a wholly owned subsidiary of the company, also supplies forging parts to the light vehicles industry from its own plant and other subsidiaries in Europe. The light vehicles industry in Europe is seeing a rapid transition to Electric Vehicles (EVs) and the company is focused on managing this transition. It also wants to benefit from the growth opportunities emerging in the Indian automotive industry.
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