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CEAT posted a robust performance in Q4 FY23 wherein margins were the highlight at 12.8%, 420 bps up qoq and 560 bps up yoy. This was a result of lower rubber and crude prices in the quarter and improvement in the underlying auto volumes. Topline went up by 11% yoy and 5.6% qoq in the quarter to ?28.5 bn. Volumes were up by 6% yoy as TBR and PCR tyres both showed traction. Raw material to sales declined to 59.9% down from 65.6% qoq and 66.5% yoy. This was somewhat offset by employee costs (7.4% v/s 6.7% qoq and 6.6% yoy) and other expenses (19.9% v/s 19.2% qoq and 19.7% yoy) on higher ad spends led by WPL and other aggressive ad campaigns. Depreciation and interest costs moved up by 12% and 28% respectively yoy. Adjusted PAT moved up strongly at ?1.34 bn on the back of strong operating profits.

Volume growth to show an all-round performance in the ensuing yearsIn Q4, CEAT reported overall volume growth of 6% (in FY23 11%). Structurally, we believe the demand is expected to improve further over the medium-term with increasing fleet
utilization levels and personal mobility trends. Also, in farm segment, performance is expected to improve with improving volumes from Q1 FY24 onwards. CEAT is targeting to improve its market share in PCR segment from 15% levels currently to ~20% levels over the next three-four years with launch of premium range of tyres in passenger car segment. In TBR segment, CEAT is targeting market share increase from 8% levels currently to ~13% levels. CEAT is also working extensively on building a strong brand image through extensive and innovative marketing campaigns. CEAT Shoppes are being revamped across India to act as premium touch-points for consumers with an aim to deliver interactive and engaging digital experience.

Within exports, the company expects demand for OTR to accelerate. The company has taken several initiatives to expand overseas market presence and is further focused on improving the exports contribution to ~25% levels structurally. CEAT has launched truck radial tyres for European markets which will further help the company make greater inroads in these larger export markets. CEAT has also launched “Winter Drive” range of products in Europe which will provide complete range of winter tyres for the automotive segment.

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