Company Update : CEAT Ltd By Motilal Oswal Financial Services Ltd
Operationally in line; higher interest and tax lead to PAT miss
* Net sales grew 14.3% YoY (+3.7% QoQ) to INR34.2b (in line), primarily due to healthy YoY volume growth in the OEM and replacement segments.
* On a QoQ basis, the OEM segment was the key growth driver, while replacement and exports remained flat.
* However, international business was hurt both on a YoY and QoQ basis due to the adverse global macro environment.
* Realization improved both on a QoQ and YoY basis.
* Segment mix: Truck/bus 30%, 2/3Ws 27%, PV 21%, OHT 15%, Others 7%
* Market mix: Replacement 53%, OEM: 28%, Exports 19%
* Gross margin improved 60bp QoQ (Vs estimate of flat GM QoQ) due to flat RM basket and price hikes taken in the quarter.
* As a result of this and operating leverage benefits, EBITDA margin improved 100bp QoQ to 11.3%.
* Adjusted for VRS expenses, PAT declined 16% YoY (+31% QoQ) to INR 1.26b – ahead of our estimate of INR 1.1b.
* Working capital increased on a QoQ basis, which led to around INR950m increase in debt sequentially to INR19.3b. The D/E ratio stood at 0.44x, while the debt/EBITDA ratio came in at 1.29x.
* Capex for the quarter was INR2.4b, funded through internal accruals. The company has announced investments of INR4b toward capacity addition in Nagpur, which will increase the capacity by 30% by the end of FY28.
* For FY25, revenue grew 11% YoY to INR 132b. EBITDA margin dipped 270bp YoY to 11.3%, primarily due to a rise in input costs. PAT declined 26% YoY to INR4.7b.
* The Board has recommended a dividend of INR30/share for FY25 (flat YoY).
* Valuation & view: The stock trades at 17.8x/14.6x FY26E/FY27E EPS.
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SEBI Registration number is INH000000412
