Ceat Q3 Results Review - Result Above Estimate; Raw Material Cost Benefit Drives Beat: Motilal Oswal

Motilal Oswal Report

Ceat Ltd.'s Q3 FY23 revenue/Ebitda/adjusted profit after tax stood up 13%/+77%/LTP YoY to Rs 27.3 billion/Rs 2.4 billion/Rs 357 million, respectively. The nine months-FY23 revenue/Ebitda/adjusted profit after tax grew 25%/16%/37% YoY, respectively.

Gross margin expanded 200 bps QoQ (60 bps YoY) to 34.5% (inline). Raw material basket dipped ~4% QoQ and there was an average price hike of ~0.5% in Q3 FY23.

Further, lower other expenses (down 210 bps YoY) resulted in an Ebitda margin expansion of 320 bps YoY (up 170 bps QoQ) to 8.7% (versus estimate 8.0%). Ebitda grew 77% YoY to ~Rs 2.4 billion (versus estimate Rs 2.2 billion) during the quarter.

Ceat's adjusted profit after tax stood at Rs 357 million (versus loss of Rs 159 million in Q3 FY22; estimate profit of Rs 419 million), hit by weakness in the Sri Lankan subsidiary.

Debt increased to Rs 23.4 billion as of Dec-22 (from Rs 23 billion in Sep-22 and Rs 22.6 billion in Dec-21) mainly due to the ongoing capex activities.

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