MOSL: CEAT (Buy)-Results below estimates-Heavy capex planned for expansion
CEAT: Results below estimates; Heavy capex planned for expansion
(CEAT IN, Mkt Cap USD1.0b, CMP INR1650, TP INR1899, 15% Upside, Buy)
- Results below estimates: 3QFY18 revenue rose 12.6% YoY on a like-to-like basis (after netting off excise of INR1,596m from 3QFY17 revenue) to INR15,742m (est. INR16,974m). EBITDA increased 22% YoY to INR1,870m (est. of INR2,054m) from INR1,535m in 3QFY17. EBITDA margin expanded 90bp YoY to 11.9% (est. of 12.1%), driven by 50bp gross margin expansion. Consequently, adj. PAT stood flat YoY at INR833m (est. of INR1,107m).
- Expect raw material price fluctuation in 1QFY19: CEAT’s raw material prices declined 240bp QoQ in 3QFY18. Rubber prices came down further in 3QFY18 after stabilizing in 2QFY18. However, the cost of crude, which forms ~45% of raw material cost, has shot up. Nevertheless, due to the three-month lagging effect, raw material cost is expected to remain stable in 4QFY18, and the impact in the form of ~5% increase is expected in 1QFY19.
- Heavy capex to ramp up capacities: CEAT is expected to incur capex of INR21b in FY19 and FY20 to ramp up facilities at Halol, Nagpur and Ambernath (40 tonnes/day). On account of anti-dumping duty on import of TBR being introduced in 2QFY18, the commercial segment has picked up better than other segments. However, CEAT’s growth in this segment has been limited because of capacity constraints, which the company intends to overcome via aggressive capacity expansion.
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.