Ceat Ltd. share price target

CEAT’s Q1FY24 EBITDA margin at 13.2% (up ~40bps QoQ) beat consensus estimate of 12%, driven mainly by ~100bps QoQ gross margin improvement. The margin expansion resulted from a decline in raw material basket (RMB) cost (down ~1.5% QoQ) and better product mix.

CEAT’s Q4FY23 EBITDA margin at 12.8% (up ~410bps QoQ) beats consensus estimate of 10.2%, mainly driven by 560bps QoQ gross margin improvement. Margin increase was driven by a decline in raw material basket cost (RMB lower by ~9% QoQ), maintaining product pricing and operational efficiencies.

CEAT has corrected ~16% in past three months and during this period, though outlook on demand did not change, raw material basket (RMB) cost declined by ~7-8%, resulting in limited scope of cut in FY24-25E earnings.

CEAT’s Q2FY23 EBITDA margin at 7% (up ~115bps QoQ) missed consensus estimate of 9.9% as despite price hike of ~4% QoQ, adverse currency movement, elevated power/fuel cost and higher mix of outsourced tyres impact negatively, thus, restricting gross margin and EBITDAM improvement QoQ.