Ceat Ltd. share price target

With a bunch of capex behind and a further cut should help FCF to improve. by volume decline as pricing was stable. Margins were better at 12.7% (PLe 7.1%), led by soft RM and cost control initiatives. While we slash FY21/22 revenues by 10.1%/8.6% (to factor in for lower OEM sales and weak replacement sales in CV segment), we upgrade margins by 100bp/80bp due to higher replacement share, lower RM and cost control benefits. This has...

Beat estimates; Short term blip, long term positive CEAT reported a strong operating performance in Q4FY20, despite challenging conditions. EBITDA grew 23% YoY to Rs 2bn. Operating margin benefited from lower RM prices, operational efficiency, and 40bps in positive impact due to finished goods inventory absorption. EBITDA margin, adjusted for one-offs, expanded 190bps QoQ to 12.3% (versus our estimate of Rs.10.3bn). Consolidated revenue de-grew 10.6% YoY to Rs.15.7bn (versus our estimate of Rs.16.1bn)....

This, coupled with the tax benefit on accumulated loss in the OTR business, offset the impact of Hence, we largely maintain our estimate, which implies ~2%/12%/15% CEATs revenues/EBITDA/PAT grew -11%/23%/-12% YoY in 4QFY20, and growth in FY20 stood at -3%/13%/-15%. However, higher expenses at the new TBR plant, partially offset by lower tax, resulted in 12% YoY decline in adj. For FY21, it should be better for Farm>2W>PC>CV as CVs RM cost would drop as natural rubber/crude prices have declined ~15%/50% from pre-COVID levels; however, the benefit would reflect only FY21 project capex guidance reduced to INR55.5b (v/s earlier guidance of INR810b), plus INR11.5b in maintenance capex. Of the total project cost of ~INR40b for capacity additions, the company has to date It has received approval from NCLT for the merger of the OTR business (100% sub) w.

Background: CEAT is one among the top four tire manufacturers in India and is a part of the RPG group. The company has a total manufacturing capacity of 0.1mn + tyres/day with plants situated in Nashik, Bhandup (Mumbai),Ambernath, Halol, Nagpur and Sri Lanka. The company manufactures all tires: Truck & Bus (30%), 2W/3W (32%), Passenger vehicles (14%), LCV (11%), Farm (6%), and Specialty (6%). In terms of market, replacement contributed 58% of the sales while OEM and exports make up 27% and 15% of the sales, respectively. CEAT has a robust distribution network consisting of over 4,500 dealers, 33 regional offices and more than...

Higher Capex and Debt to Impact Profitability CEAT has delivered a strong operating performance in 2QFY20. Its EBIDTA margin was 110bps higher than our estimates, supported by lower commodity cost, while EBIDTA was 14% higher than our estimate. Its volume declined 3% YoY due to subdued sales in OEM segment, flat volumes in replacement and single digit growth in exports. Its consolidated revenue fell by 5% YoY and 4% QoQ to Rs17.5bn. Consolidated EBIDTA declined by 5% YoY (+3% QoQ) to Rs1.7bn, while adjusted PAT fell by 46% YoY as well as 46% QoQ to Rs445mn due to higher depreciation and interest outgo. EBIDTA margin improved 10bps YoY (+53bps QoQ) to 10.1% vs....

We attended CEAT's annual Investor day and are downgrading the stock Change in Estimates | Target | Reco from Hold' to Reduce' on account of further downside that we see to margins and rise in debt levels. Given the various capacity expansions (capex of...

We attended CEAT's annual Investor day and are downgrading the stock Change in Estimates | Target | Reco from Hold' to Reduce' on account of further downside that we see to margins and rise in debt levels. Given the various capacity expansions (capex of...

CEAT's consolidated Q4FY19 revenues grew 5.2% YoY to Rs 17.6bn supported by a ~6% increase in realisations. EBITDA dropped 18% YoY as margins slipped 260bps to 9.2%. A lower tax rate slowed the decline in adj. PAT to 2% YoY at Rs 926mn. As per management, the demand climate remains challenging due to sluggish OEM sales as well as a replacement market slowdown, while rising crude and rubber prices could inflate RM costs. We trim FY20/FY21 EPS by 3%/6% to bake in lower revenues and roll over to a Mar'20 TP of Rs 1,350 (Rs 1,430 earlier)....

Earnings call highlights: (a) Price cut of ~1% across products in the replacement segment. (b) Replacement segment remains sluggish. But, industry should grow in single-digits. CEAT hopes to outperform driven by TBR & PCR capacity addition. (c) With inflation in crude and international rubber prices, it expects some cost pressures to reflect in 2QFY20. In a weak demand environment, it sees limited scope for a price hike in the near future, and hence, margins should be under stress. (d) FY20 consol. capex guidance is at INR15-16b (~INR11b in FY19). 2W capacity should start in the...

CEAT Q4 numbers were broadly in line with estimates. Consolidated revenue grew by 5.2% YoY to ` 17.6bn led by 6% increase in ASP partially offset by 1% de-growth in volume (affected by slowdown in both OEMs and replacement market). EBITDA fell 17.8% YoY to ` 1.62bn with muted margin at 9.2% (+100bps QoQ/-260bps YoY) led by negative operating leverage and higher ad spend. We believe that slowdown in replacement segment would continue in Q1 (especially in CV segment as business at ground level is pretty muted), while OEM production level would further...