ICICIdirect has recommended 'Buy' on Mahindra CIE Automotive with target price of Rs 130 with current market price (CMP) of Rs 81 with upside potential of 60% in its report.

Commenting on the investment rationale, the broking firm said, ''Mahindra CIE Automotive (MCI), an entity formed by the amalgamation of all automotive component companies of Mahindra Systech and CIE's European forging companies.

Post the consummation of the deal (post completion share swap/purchase procedure after the regulatory/legal approvals), CIE will hold 51% in the entity while Mahindra would directly hold 20%. MCI has a presence across both commercial vehicles and passenger vehicles with complementary strengths of the dual parents.

With cost controls and economic recovery to play out we expect utilisation levels to improve leading to EBIT margins rise to 8%, RoCE expansion to 14.5% in FY17E. CIE's track-record on turnarounds via cost control and high focus on financial metrics gives us confidence. We initiate coverage with Buy rating.''

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