CIE Automotive India Downgraded to 'Hold' by MarketsMOJO, Despite Positive Quarter Results

CIE Automotive India, a largecap company in the castings/forgings industry, has recently been downgraded to a 'Hold' by MarketsMOJO on September 2, 2024. This decision was based on various factors, including the company's strong ability to service debt with a low Debt to EBITDA ratio of 1.14 times.
While the company has shown positive results in the Jun 24 quarter, with its highest operating cash flow of Rs 1,383.26 Cr and a 55.67% growth in PAT (9M), it has also recorded its highest operating profit to interest ratio of 17.07 times. Additionally, the stock is currently in a Mildly Bullish range and its technical factors, such as MACD and Bollinger Band, are also Bullish.

With a ROE of 13.9, CIE Automotive India has an attractive valuation with a 3.6 Price to Book Value. It is also trading at a discount compared to its average historical valuations. However, despite generating a return of 12.78% in the past year, the company's profits have only risen by 51.3%, resulting in a PEG ratio of 0.5.

It is worth noting that the company has a high institutional holding of 23.28%, indicating that these investors have better capability and resources to analyze the fundamentals of companies compared to most retail investors. Their stake in CIE Automotive India has also increased by 1.64% over the previous quarter.

However, the company has shown poor long-term growth, with its net sales growing at an annual rate of 2.24% and operating profit at 4.86% over the last 5 years. This has also led to the stock underperforming the market in the last 1 year, with a return of only 12.78% compared to the market (BSE 500) returns of 38.49%.

In conclusion, while CIE Automotive India may have some positive aspects, such as its ability to service debt and attractive valuation, it is important to consider its poor long-term growth and underperformance in the market before making any investment decisions.