BENGALURU (Reuters) – Indian tyremaker CEAT beat first-quarter profit estimates on Thursday, as price hikes coupled with healthy demand in the replacement market helped outweigh higher rubber costs.
CEAT’s profit increased 6.6% to 1.54 billion rupees for the April-June quarter, beating analysts’ expectation of 1.52 billion rupees, according to LSEG data.
Revenue rose 8.8% to 31.93 billion rupees, marking the biggest rise in nearly three years, per LSEG.
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KEY CONTEXT
CEAT is the first of its peers to report results for the April-June period in which car makers’ sales to dealers grew at their slowest pace in at least two years. Still, while the likes of Maruti Suzuki sold fewer cars to dealers, two-wheeler makers, including Hero MotoCorp, clocked a nearly 21% sales growth.
Moreover, healthy demand in the tyre replacement market ahead of the monsoon season was expected to soften the blow of higher rubber prices for tyremakers, analysts said.
CEAT plans to front-load capital expenditure this year “to ensure we are well-prepared to meet rising demand,” CEO Arnab Banerjee said in a press release.
PEER COMPARISON
Estimates Analy
(next 12 sts’
months) senti
ment
Tic PE EV/E Revenue Profi Mean # of Stock to price target** Div yield (%)
ker BITD growth t ratin anal
A (%) growt g* ysts
h (%)
CEAT Ltd 15. 7.37 9.94 3.91 Buy 14 0.95 0.44
32
MRF Ltd 26. 13.0 8.00 4.08 Sell 7 1.23 0.15
26 4
Apollo Tyres 17. 8.27 7.63 11.77 Buy 23 1.04 1.09
Ltd 08
JK Tyre & 12. 7.09 8.44 18.61 Buy 5 0.86 0.95
Industries 06
Ltd
* The mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
APRIL-JUNE STOCK PERFORMANCE
(Reporting by Nandan Mandayam in Bengaluru; Editing by Savio D’Souza)
