Ceat Q2 Results Review - Strong Beat Led By Lower Raw Material Costs, Product Mix: Motilal Oswal

Motilal Oswal Report

Ceat Ltd.’s Q2 FY24 results surprised positively with a strong Ebitda beat at Rs 4.6 billion (versus estimate Rs 4.2 billion). This can be attributed to a 2.5-3% QoQ decline in raw material prices and a favorable product mix.

We believe the Ebitda margin of 14.9% achieved during the quarter (up 170 bp QoQ) has reached its peak. The recent uptick in commodity prices is expected to impact profitability in the upcoming quarters.

We raise our FY24E/FY25E earnings per share by 7%/3% to account for-

1. better gross margins,

2. higher ‘other income’, and

3. a lower tax rate.

We maintain a 'Buy' rating with a target price of Rs 2,950 (based on ~15 times September-25E earnings per share).

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