Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

CEAT - Market share ambitions remain strong - ICICI Securities

Posted On: 2021-06-19 11:21:17 (Time Zone: UTC)


CEAT Tyres hosted its annual investor conference virtually to elucidate its long term growth plans, and strategies to achieve them.

Key takeaways from the event:

- Demand was impacted in Q1FY22 from covid 2nd wave and subsequent plant shutdowns across OEMs. Replacement segment witnessed ~20-40% decline QoQ in Apr'21/May'21. Truck segment were least impacted. June'21 has seen revival of replacement demand while OEM production continues to ramp modestly.

- CEAT has a leadership market share in 2W with aspiration to further raise the same to 30-35% market share vis-a-vis current 28-30%. CEAT's share of business with new generation electric 2W companies (e.g. Ola Electric, Tork) stands at ~50%.

- Management indicated strategic focus on PCR segment, with market share aspirations of 20% (next 5-years) from current 13-14%. In FY21, PCR segment market share grew from 10-11% to ~13-14%. Market share within OEM's in PCR is expected to reach 20% by FY23 from 15% in FY21, this could act as a catalyst to improving replacement market share.

- In the truck and bus segment, market share in TBR segment stood at ~7% while for TBB segment it is at ~13%. Management targets TBR market share to reach 13-15% in the next five years aided by new capacity additions. CEAT has benchmarked its product with peers on cost/km basis, and has found itself to be competitive. The strategy remains to keep pricing ~1-1.5% lower than peers while providing same operating metrics as peers.

- Management indicated exports will expand to EU region with PCR segment and then gradually enter with TBR segment as well. The company has entered South East Asia with Indonesia being a dominant 2W market. US and EU remain a target market for off-highway segments and other speciality products.

- Capex for FY22-23 is likely to be Rs18bn with major spends on new TBR capacity addition (3k tyres/day) along with balance capex for PCR capacity in Chennai plant and the second phase towards Nagpur plant expansion in 2W capacity. The company has expanded network touchpoints by 600-700 in FY21.

- CEAT has taken fixed cost saving initiatives and targets Rs1.5bn with 0.75bn savings realised in FY21 from employee costs, operational and power costs. Margin pressure in FY21 was due to higher manpower costs on new capacity expansions.

- Blended RM cost increased by 8-10% QoQ in Q1FY22. CEAT took cumulative price hike of ~4% in Apr'21/May'21 and is expected to take another hike at the end of Q1 to mitigate the impact. Current raw material inventory stands at ~30 days.

Valuation

We like CEAT's consistency in margins as growth rebounds; however, persisting commodity cost pressures, higher capex and lower pricing power raise concerns on margin sustenance. We revise our earnings for FY22E/ FY23E by 6.7/7.3%, respectively. We value CEAT on SoTP basis with target multiple for India business at 14x FY23E EPS and maintain ADD rating on the stock with a revised target price of Rs1,533 (earlier: Rs1,432).

Key downside risk: Sharper deterioration in FCF profile due to rise in capex.

Key upside risk: Strong reduction in commodity prices leading to positive surprise in margins.

Shares of CEAT LTD. was last trading in BSE at Rs.1364 as compared to the previous close of Rs. 1379.75. The total number of shares traded during the day was 12690 in over 1409 trades.

The stock hit an intraday high of Rs. 1390 and intraday low of 1312. The net turnover during the day was Rs. 17123597.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.


Other Headlines:

Maintain BUY on Gateway Distriparks - Upbeat outlook with expected commencement of DFC - HDFC Securities

Maintain ADD on Colgate Palmolive - Steady growth, buoyant margins - HDFC Securities

Ajanta Pharma - Downgraded to ADD - India shines, margins a tad lower - HDFC Securities

Maintain REDUCE on ABB India - Capex recovery awaited - HDFC Securities

Tech Mahindra - Healthy deal wins - HDFC Securities

SRF Ltd - Technical textiles garners high realisation - HDFC Securities

UTI Asset Management Company - Tailwinds galore! - HDFC Securities

Sagar Cements - Strong show; capacity set to increase 43% in Sep-21 - HDFC Securities

Maintain ADD on Radico Khaitan - Beat in volumes, remain constructive - HDFC Securities

Mahindra Lifespaces - Mixed performance - HDFC Securities

Indus Towers - Q1 FY22 first cut - YES Securities

Tech Mahindra - Q1 FY22 first cut - YES Securities

TVSL - Q1 FY22 first cut - YES Securities

Orient Electric - Q1 FY22 first cut - YES Securities

Security and Intelligence Services (SIS) - Q1FY22 Concall Highlights - YES Securities

LIC Housing - Q1 FY22 first cut - YES Securities

Home First - Q1 FY22 first cut - YES Securities

Colgate-Palmolive (India) - Q1 FY22 Result Report - YES Securities

Ajanta Pharma - Q1 FY22 Result Report - YES Securities

Sagar Cements Ltd - Q1 FY22 Result Report - YES Securities

CCL Products (India) - Q1 FY22 Result Report - YES Securities

UTI AMC - Q1 FY22 Result Report - YES Securities

Dalmia Bharat Ltd - Q1 FY22 Result Report - YES Securities

Mahanagar Gas Ltd - Q1 FY22 Result Report - YES Securities

Dwarikesh Sugar - Q1FY22 First Cut - ICICI Direct

Tech Mahindra - Q1FY22 First Cut - ICICI Direct

PVR Ltd - Q1FY22 First Cut - ICICI Direct

EPL Ltd - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - TCI Express - ICICI Direct

Q1FY22 Result Update - Sagar Cements - ICICI Direct

Solar Industries - Q1FY22 First Cut - ICICI Direct

Indus Towers (erstwhile Bharti Infratel) - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - Mahindra Logistics - ICICI Direct

Q1FY22 Result Update - Maruti Suzuki - ICICI Direct

Q1FY22 Result Update - Mold-Tek Packaging - ICICI Direct

Q1FY22 Result Update - Nestlé India - ICICI Direct

Q1FY22 Result Update - Coforge Ltd - ICICI Direct

Q1FY22 Company Update - Birlasoft Ltd - ICICI Direct

Colgate Palmolive - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - Granules India - ICICI Direct

Q1FY22 Company Update - Pfizer Ltd - ICICI Direct

Jyothy Lab - Q1FY22 First Cut - ICICI Direct

Dalmia Bharat - Strong performance; embarks on major expansion - HDFC Securities

Maintain BUY on Teamlease Services - Future bright - HDFC Securities

Maintain REDUCE on Nestle India - Beat on revenue, a miss in margin - YES Securities

Tech Mahindra Q1FY22RU - First cut - YES SECURITIES

Maruti Suzuki - A weak quarter, CNG variants to ramp up in Q2FY22 - HDFC Securities

Taro Q1 FY22 result - key highlights - YES Securities

Tata Coffee - 1Q results - YES Securities

MSIL - Q1 FY22 results - YES Securities


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020