MOSL: CEAT LTD (Buy)-Raw Material headwinds to continue in 1QFY18
​CEAT Ltd: RawMat headwinds to continue in 1QFY18; Maintain Buy
(CEAT IN, Mkt Cap USD1.0b, CMP INR1520, TP INR1741, 15% Upside, Buy)
- In-line revenue and adj. PAT; EBITDA below estimates: 4QFY17 revenue grew 5% YoY to INR16.4b (est. of INR16.5b), driven by volume growth of 4.4% and pricing mix. EBITDA margin shrunk 390bp YoY to 8.1%, impacted by gross margin contraction of 600bp, partly offset by lower other expenses. EBITDA fell by 29% YoY to INR1,325m and adj. PAT by 25% to INR798m (est. of INR777m). Tax was negative at INR45m due to R&D expenses (200% deduction in income tax) and capitalization of project (investment allowance of 15%). For FY17, revenue grew 1% YoY, EBITDA margin shrunk 270bp YoY to 10.2%, while adj. PAT declined 17% YoY to INR3,775m.
- Replacement market performs well, while OEM and exports were laggards: Replacement market grew 10% YoY in 4QFY17, while the OEM and exports segments declined. OEM was impacted post demonetization (was growing at 15% before), while exports were affected by import restrictions placed in Indonesia. In the replacement market, CV volumes were flattish, motorcycle and scooter were positive, and PV grew in northwards of 25%. In case of OEM, tractors was weak, 3Ws exhibited negative growth, while PVs/UVs registered positive growth.
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.