Ceat Ltd. share price target

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...

CEAT's Q3FY19 reported standalone operating margin at 8.3%, down 405bps Change in Estimates | Target | Reco quarter were down 170bp (despite RM/ton up 2% qoq) on account of a finished...

revenue grew ~9% YoY (-2% QoQ) to INR17.1b (in-line) in 3QFY19, driven by 2% YoY (-5.4% QoQ) volume growth. The impact of RM cost inflation of 2.1% QoQ was offset by price hike of 2-3%. EBITDA declined 24% YoY (-10% QoQ) to INR1.4b (our impacted by adverse mix and inventory build-up. EBITDA margin contracted 80bp QoQ/360bp YoY to 8.3%, below our estimate of 9.2%. Adj. PAT (a) OEM growth outpaced replacement growth (slowed down in CVs and farm but expected to recover from Mar19) in the quarter. (b) RM cost is likely to gradually decline Mar19 onward, with marginal benefit of lower RM cost in 4Q.

Strong focus on PCR, 2W and OHT bodes well for margins We met CEAT's MD Mr Anant Vardhan Goenka and CFO Mr Kumar Subbiah at the RPG Annual Investor Conference 2018. Key takeaways: CEAT plans to invest INR35-40b over the next 3-5 years to expand its capacity. This would lead to its capacity increasing by ~50% post full ramp-up in FY21. Majority of this capex is directed toward its focus areas of passenger car radial tyres...

CEAT numbers reflect the challenges it seems to be facing in the retail market with increasing competition and lower growth in personal mobility segment (2W and 4W) as compared to the CV segment. CEAT is very small in CV segment. CEAT is going all guns blazing on advertising to hold on market share in the fiercely competitive market. Numbers were below parameters and we have revised our estimates downwards to factor in lower growth and intensive competition. Capacity expansion in on track but will be available from 2019 onwards. We rollover valuations to FY20E EPS and...

CEAT's revenue grew by 14% YoY and 6% QoQ to Rs16.8bn, which is below our estimate of Rs18.1bn. Aggregate volume growth stood at 11.5% YoY for the quarter. OEM business grew by strong double digit, while replacement growth was muted at 3%. Looking ahead, we expect revenue growth to increase with the sustained volume growth from 2W (both in OCM and replacement) and ramp-up in Ambernath unit's utilisation. EBITDA grew by 50% YoY and 6% QoQ to Rs2bn vs. our estimate of Rs2.1bn owing to lower than estimated revenue growth. Adj...

Sector: Auto-ancillary /Mid-Cap | Earnings Update 3QFY18 Background: CEAT, part of the RPG group, is one among the top four tire manufacturers in India with a total manufacturing capacity of >1000 MT/day & manufacturing plants situated in Nashik, Bhandup (Mumbai),Ambernath, Halol, and Gujarat, the company manufactures all tires: Truck & Bus (33%), 2W/3W (32%), Passenger vehicles (14%), LCV (12%), Off Highway (12%). In terms of market, replacement contributed 62% of the sales while OEM and exports make up 26% and 12% of the sales, respectively. CEAT has a robust distribution network consisting of over 4,500 dealers, 33 regional offices and more than 500+ C&F; agents. CEAT commands >12% market...

excise. Exceptional item of INR80m was on account of VRS to employees. Consequently, adj. PAT fell 26.8% YoY to INR779m (est. of INR921m). Stage set for robust H2: Raw material prices declined 520bp QoQ on a comparable basis (post excise net-off) in 2QFY18, after increasing by 260bp QoQ in 1QFY18. Exports also suffered in H1 on account of an appreciating INR, foreign currency unavailability in Egypt, and political unrest in countries like Kenya and Indonesia. However, with raw material prices and currency gaining stability and restocking picking up pace from the month of...