MOSL: CEAT (Buy)-Stability in performance on the horizon
​CEAT: Stability in performance on the horizon; Maintain Buy
(CEAT IN, Mkt Cap USD1.1b, CMP INR1746, TP INR2116, 21% Upside, Buy)
Results below estimates: CEAT's 2QFY18 revenue declined 4.6% YoY to INR15,230m (est. of INR17,515m). EBITDA stood at INR1,747m (est. of INR1,839m; 2QFY17: INR1,854m), with the margin coming in flat at 11.5% (est. of 10.5%), as overall revenue in the quarter was netted off against 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 September, CEAT is set to recover the lost growth of 1H in 2HFY18. Moreover, the company undertook strict control over discretionary expenses, reducing other expenses by 300bp QoQ in 2QFY18.
Ramping up capacities for aggressive market share gain: CEAT holds ~30% and ~10% market share in 2W and passenger car replacement, respectively. With a capex of INR28b until FY20 to ramp-up facilities at Halol, Nagpur and Ambernath (40 tonnes/day), and improved engagement with OEMs, the company is set to bolster its market share.
CEAT Limited is engaged in manufacturing and sale of automotive tires, tubes and flaps. The Company manufactures radials for a range of vehicles. It offers products for light commercial vehicles (LCVs), motorcycles, scooters, cars, farm vehicles and trailers, off the road (OTR)/specialty vehicles and trucks, among others. It has capacity to produce approximately 95,000 tires per day. The CEAT Bike tires include CEAT Zoom, CEAT Zoom Tubeless, F67, F85, Milaze, Secura Sport and Secura Zoom, among others. Its scooter tire range includes Gripp and Zoom D. Its car tire range includes BT, Czar AT, Czar HT, Rhino and Rhino TQ. It offers Buland and Buland Mile XL RIB for LCVs. It offers Anmol SL and Buland Mile XL for autos. Its tire range for farm and agriculture vehicle includes Aayushmaan Front, Aayushmaan Rear, Samraat Front and Samraat Super Front. It has developed OTR or specialty tires for mining, quarrying, rock excavation, construction and port applications.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.