Ceat Q3 Results Review — Price Hikes Continues, Margins Accretion Likely; Yes Securities Reiterates 'Buy'

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Yes Securities Report

Ceat Ltd. Q3cFY25 were steady as revenues/Ebitda were in-line while adjusted profit after tax miss was led by higher interest and depreciation. Ebitda margins were slightly weak at 10.3% (estimate 10.7%, -380 bp YoY/ -70bp QoQ) led by raw material basket inflation of ~1.2% in QoQ.

Overall volumes grew by ~8% with double digit growth in the replacement and exports segments. Despite the recent decline in natural rubber prices, raw material basket inflation to likely be flat or go-up by 1% QoQ in Q4 FY25E. This was partially offset by aggrieve price hikes of ~1-1.5% in truck-bus radial (versus 2% in 2Q and ~2.4% for commerical vehicle in Q1), PCR by ~4% (versus 3.5% in Q2 and 2.5-2.8% in Q1), with follow-up price hikes expected in Jan’25.

While full benefit of OEM indexation (3-4%) and exports/replacement price hikes to play out in Q4 FY25E. Ceat has guided a high singledigit volume growth in FY25, fueled mainly by healthy demand in the replacement and export markets. To factor in higher-than-expected interest and depreciation, we cut FY27 consolidated EPS by ~1%. Going forward, focus on high margin segments such as exports rampup (~19% of sales) and OHT to aid volumes and margins.

Valuations at18.8x/13.7x (versus 10 year long period average of ~18.6x) seem reasonable and are yet to reflect the improved positioning. Reiterate ‘Add’ with target price at Rs 3,607 (SoTP).

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