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.

CEAT's revenue grew ~9% YoY (-2% QoQ) to INR24.1b, but EBITDA fell 59% YoY (39% QoQ) in 3QFY22 to INR1.3b (INR2.1b est.). It incurred a first quarterly loss in a decade at INR148m (v/s PAT of INR1.4b in 3QFY21). Its 9MFY22 revenue grew 27% YoY but EBITDA/PAT declined 28%/83.5% YoY. Volumes fell 5.5% YoY (3% QoQ), impacted by a decline in replacement (14% YoY) and OEM (7% YoY) but offset by strong exports (+27% YoY). Gross margin contracted 11.6pp YoY (-290bp QoQ) to 34% (v/s 36% est.), impacted by cost inflation (4% QoQ increase in RM basket, but price hike of...

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 (33%), 2W/3W (30%), Passenger vehicles (13%), LCV (8%), Farm (9%), and Specialty (7%). In terms of market, replacement contributed 71% of the sales while OEM and exports make up 17% and 13% of the sales, respectively in 3QFY21. CEAT has a robust distribution network consisting of over 3,400+ dealers, 33 regional offices...

CEAT's 3QFY22 consol. revenue came missed our estimates at Rs 24.1B (9% YoY/ -1% QoQ, PLe 26.5B) led by volume decline of 5.5% YoY/ 3% QoQ, while realizations grew ~2% sequentially. Margins came substantially lower at 5.5%...

CEAT's 2QFY22 consol. revenue came ahead of our estimates at Rs 24.5B (24% YoY/ 29% QoQ, PLe 22.5B) led by volume growth of 9% YoY/ 23% QoQ, while realizations grew ~5% sequentially. Margins came lower at 9.0% (-580bp...

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 (33%), 2W/3W (30%), Passenger vehicles (13%), LCV (8%), Farm (9%), and Specialty (7%). In terms of market, replacement contributed 71% of the sales while OEM and exports make up 17% and 13% of the sales, respectively in 3QFY21. CEAT has a robust distribution network consisting of over 3,400+ dealers, 33 regional offices...