📉 CIE Automotive is at its 52-week low, down more than 20% since June and 36% below its 2018 highs.
🚗 Despite being in a cyclical sector, CIE Automotive’s revenues and profits are growing, with no losses in any year.
🌎 The company has diversified sales globally, with a significant focus on growth markets like India and Brazil.
⚠️ Concerns about potential tariffs on Mexican exports to the U.S. have negatively impacted the stock.
💰 CIE Automotive trades at a P/E of 8, with expectations of continued growth through acquisitions.
@Invierteygana:
“CIE Automotive is a company that designs, manufactures, and sells components for the global automotive market. Currently, the company has fallen more than 20% since June, being at 52-week lows, and is 36% below the highs of 2018, when the market was too excited about the stock. Despite being a cyclical company in a bad sector, its revenues and profits are growing, and we do not see losses in any year. In 2024, automobile sales fell worldwide. Despite this, CIE’s profits grew by 1.7%. If we do not take into account an extraordinary profit in 2023, they grow by 5%, which is a very good result, especially if we look at other companies in the sector. Gestam has reduced its revenues and profits this year. The 2024 results of the Volkswagen group are also expected to be in this line. However, CIE’s stock is doing the opposite, despite the evolution of the results, the fact that the company generates a free cash flow similar to the profits, and that it is one of the highest quality companies in the sector. Its net margin is higher than that of its competitors, and it has a very good ROCE for an industrial company. In addition, this year it has continued to reduce net debt. So, you may wonder why the stock is falling. Well, we can think that because sales in the fourth quarter fell, although the profit remained, but the main reason is the following: CIE has very diversified sales worldwide, 25% in Europe, 7% in China, 16% in India, and 10% in Brazil. They are very focused on Brazil and especially in India, as they consider that these are markets where the automotive industry will grow. The remaining 30% is from North America, where they have 17 plants, 12 are in Mexico and five in the United States, and CIE has announced a new plant in northern Mexico. CIE has plants in northern Mexico to export to the United States, taking advantage of much lower costs in Mexico. So, Trump’s announcements of tariffs on Mexico and Canada have not been well received by the stock. Despite the postponement of these tariffs, the reality is that the United States produces about 11 million vehicles a year, but sales are 17 million. So, they import about 6 million vehicles, and the United States does not currently have the productive capacity or the labor to manufacture all the automobiles it consumes. There are also not enough component factories, so manufacturers will have to import components. These tariffs would increase costs for U.S. manufacturers, so I am not sure that they will be applied, and if they are applied, I do not think they will last long. On the other hand, Mexico is only a part of the sales of the entire company. The company trades at a P/E of 8, taking into account the growth that the company can have, especially through the purchase of companies in Brazil, India, or Mexico. We expect it to achieve $3.45 per share of profit in 2029. If we value with a P/E of 11, we arrive at a real value for 2029 of 38. This gives us a potential revaluation for 2029 of 69%, which is 11% per year. Taking into account the dividend it pays, we arrive at an estimated annual return for the shareholder of 15%.”
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