Ceat - Profitability On A Comeback Trail: ICICI Securities

ICICI Securities Report

Ceat Ltd. has corrected ~16% in past three months and during this period, though outlook on demand did not change, raw material basket cost declined by ~7-8%, resulting in limited scope of cut in FY24-25E earnings.

Additionally, Ceat is expanding into off-highway tryes exports space with rising stock keeping units and wider distribution network and is planning to expand capacity in its all radial Ambernath (Maharashtra) facility from 60 tpd to 140 tpd in next 12-18 months.

We believe, amid low growth and high competition in domestic replacement tyre market, Ceat is looking forward to ramp-up exports briskly in FY24-25 from current ~20% revenue mix.

Ceat has its portfolio of electric vehicle-dedicated tyres ready, across categories, with low rolling resistance and higher silica content.

With capacity utilisation in truck-bus radial space across FY23 set to be in the band of 75-80% for Ceat, capex for FY23-24E is likely to be sub-Rs 10 billion per annum, helping it avoid any increase in debt on books.

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