Ceat Q4 Results Review - Guides For Healthy Volumes In FY25E: Yes Securities

Yes Securities Report

Ceat Ltd. Q4 FY24 missed our estimates as ~100 basis points QoQ expansion in consolidated gross margins at 42.3% (estimate ~41%) was offset by EPR provisions of Rs 720 million for FY24, higher brand spends (more than 2%) due to IPL and exports freight. This led to ~5%/~14% Ebitda miss on our/street. The management indicated at prevailing prices, the EPR impact of 1.2-1.4% of domestic sales likely, however co have started engaging with original equipment manufacturers for price adjustments while for replacement, it would be passed on with price hikes.

However, on the positive side, despite TBR price cuts by the industry in Q4 FY24, Ceat have maintained pricing in TBR while have taken moderate price hike in passenger car radial and farm with further hike of ~1.5% in April 2024.

With the recent volatility in crude and NR prices, raw material basket inflation of 3-4% QoQ expected in Q1 FY25E. Going forward, focus on high margin segments such as exports ramp-up (~19% of sales) and off-highway-tyres to aid volumes and margins. However, we build in revenue growth of ~9% for FY25E (versus guidance of high single to early double digit volume growth) led by moderating growth in original equipment manufacturers. We have cut our FY25/26 EPS by 6-8% to factor in for EPR hit and raw material inflation.

Valuations at14.8 times/13.6 times (versus 10 year LPA of ~17 times) do provide limited upside.

Hence, we maintain ‘Neutral’ on the stock with revised target price at Rs 2,803 (versus Rs 2,901) based on ~15 times Mar-26 earnings per share.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.