Views on Ceat 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Ceat 3QFY2014 results:

Ceat results lower-than-expected on the bottom-line front

"For 3QFY2014, Ceat reported lower-than-expected results on the bottom-line front due to sequential decline in EBITDA margins on account of the raw-material cost pressures. Top-line however, grew stronger than expected by 8.2% qoq to Rs. 1,386cr, which surprised us positively, given that the demand environment remains challenging. We believe that the company's top-line benefited from the new OEM partnerships like Royal Enfield, Volvo-Eicher and Bajaj Auto and also on account of strong exports performance. EBITDA margins declined 178bp qoq to 11.1%, lower-than-expectations of 12.9%, largely due to raw-material cost pressures. Raw-material cost as a percentage of sales surged sharply by 221bp qoq; while, employee and other expenditure broadly stood stable. As a result, operating profit declined 6.7% qoq to Rs. 154cr. Led by lower-than-expected operating performance, sequential decline in other income and higher tax-rate, net profit declined 19.9% qoq to Rs. 61cr, lower than our expectations of Rs. 70cr. On a yoy basis though, net profit witnessed a strong 98.9% yoy growth driven by 15.1% yoy growth in the top-line and 268bp yoy expansion in EBITDA margins. We retain our positive view on the company and believe that the company will continue to benefit from the new OEM partnerships and expected stability in raw-material prices. After a stellar stock price performance (returns of ~150%) over the last six months, the stock is currently trading at 3.6x FY2015E earnings. Our rating is currently under review."

Ceat 3QFY2014 Result Review (CMP: Rs. 314/ TP: Under review/ Recommendation: Under review)

Source : Equity Bulls

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