Ceat zooms 19% to hit an all-time high; m-cap crosses Rs 10,000 crore-mark

Shares of Ceat soared 19 per cent to hit a new high of Rs 2,498.1 in Thursday’s intra-day trade amid heavy volumes, on hopes of strong demand outlook and healthy earnings. The stock surpassed its earlier record high of Rs 2,181.69 that it had touched on May 25, 2023.

A sharp rally in the tyre-maker firm saw Ceat’s market capitalisation cross Rs 10,000 crore-mark. The company’s market capitalisation touched Rs 10,131 crore in Thursday's intra-day trade.

In the past two months, the market price of Ceat skyrocketed 50 per cent after margins expansion of the company were back to double digit in the January-March quarter (Q4FY23).

The drop in raw material prices and maintaining product realisation helped in expansion of gross margins and earnings before interest, taxes, depreciation and amortisation (Ebitda) margins by 422 bps during Q4FY23.

Ceat crossed an important milestone of Rs 10,000 crore of revenue during the course of the Q4FY23 and ended the financial year with revenue of Rs 11,263 crore. The company, moreover, delivered a strong growth of 21 per cent in FY23.

The growth during the year was largely driven by OEMs and specialty & passenger category tyres. On exports, Ceat said it continued to face pressure as a result of global economic headwinds, largely spurred by the ongoing war and currency devaluation.

Ceat, the flagship company of RPG Enterprises, is one of India’s leading tyre manufacturers and has a strong presence in global markets. Ceat produces more than 41 million high-performance tyres, catering to various segments like 2-3 wheelers, passenger and utility vehicles, commercial vehicles and off-highway vehicles.

According to the IMF, the Indian economy will contribute 15 per cent of global growth in CY23. Ceat anticipates good growth in the Indian market and overseas in the near future as a result of stabilisation of commodity prices and improved supply chains leading to stronger margins.

The company said that the Indian tyre industry has the potential to become a global leader in Indian manufacturing, especially with the current search for alternatives to China due to geo-political tensions.

"India is a world-class radial tyre manufacturing facilities and any international vehicle manufacturers also started using Indiamade tyres for their high-end models. However, the industry needs greater support for raw material security, particularly for natural rubber, through reduced duties. With the right policies in place, the Tyre Industry can further enhance its exports and contribute significantly to India’s economic growth," the management added.

In FY24, Ceat sees mix of replacement and exports segment to improve and OEM mix to fall. It sees volumes growth could be in the range of low to mid-single-digit in major segments with replacement demand outperforming.

Exports market recovery, however, might be slow due to slowdown in Europe in FY24. Hence, Ceat expects raw material cost to remain in a range and will have to pass on benefits to customer in FY24.

Analysts at Prabhudas Lilladher said that though the impact on export volumes, moderation in growth and higher interest costs may put pressure on profitability in the near-term; correction in commodity cost coupled with cost control would aid margin expansion.