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Mahindra CIE Automotive Limited (NSE:MAHINDCIE), a ₹105.54b small-cap, is an auto company operating in an industry whose long product cycles and deep capital outlays make planning ahead difficult. A challenge facing the sector is navigating the path to driverless cars, requiring high capital outlays in technology. Automobile analysts are forecasting for the entire industry, a positive double-digit growth of 22.5% in the upcoming year , and an enormous growth of 91.3% over the next couple of years. This rate is larger than the growth rate of the Indian In this article, I’ll take you through the automobile sector growth expectations, as well as evaluate whether Mahindra CIE Automotive is lagging or leading its competitors in the industry.
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What’s the catalyst for Mahindra CIE Automotive’s sector growth?
The increasing presence of tech firms in the auto industry cannot be discounted by OEMs. In the past year, the industry delivered growth in the twenties, beating the Indian market growth of 21.8%. Mahindra CIE Automotive leads the pack with its impressive earnings growth of over 100% last year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Mahindra CIE Automotive poised to deliver a 45.3% growth over the next couple of years compared to the industry’s 22.5%. This growth may make Mahindra CIE Automotive a more expensive stock relative to its peers.
Is Mahindra CIE Automotive and the sector relatively cheap?
The automobile sector’s PE is currently hovering around 21.55x, relatively similar to the rest of the Indian stock market PE of 19.55x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13.9% compared to the market’s 9.3%, potentially illustrative of a turnaround. On the stock-level, Mahindra CIE Automotive is trading at a higher PE ratio of 29.54x, making it more expensive than the average automobile stock. In terms of returns, Mahindra CIE Automotive generated 9.6% in the past year, which is 4.3% below the automobile sector.
Next Steps:
Mahindra CIE Automotive’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Mahindra CIE Automotive has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other automobile companies. However, before you make a decision on the stock, I suggest you look at Mahindra CIE Automotive’s fundamentals in order to build a holistic investment thesis.