CEAT Ltd - Q3FY22 Result First cut - YES Securities

Weak results led by subdued volumes and multi years low gross margins

• Consol revenue declined 2% QoQ (+9% YoY) at Rs24.1b (est at Rs26.1b, cons at Rs22.3b) led by weak replacement demand, subdued demand from OEMs due to chip shortage and softer uptick in rural market.
• Gross margins contracted 290bp QoQ to 34% (est at 37%) led by lag in RM inflation pass through. This has resulted in record low EBITDA margins at 5.6% (-340bp QoQ, est at 8.7%/cons at 9.7%). EBITDA declined 39% QoQ/ (-59% YoY) at Rs1.3b (est at Rs2.3b/cons at Rs2.2b).
• Exceptional item of Rs65.2m has largely been recorded towards VRS.
• Weak op performance was partially offset by lower dep at Rs1.1b (est at Rs1.2b) and lower tax at 10.7% (est at 27.2%) resulting in Adj. loss of Rs151m (v/s profit of Rs430m in 2QFY22, est profit at Rs563m/cons at +Rs672m).
• Total debt increased to Rs22.6b as on Dec'21 (v/s Rs15.5b as on Sep'21) resulting in D/E of 0.7x (v/s 0.6x as on Sep'21).
• More details post call today at 9am. Dial ins- 022-6280 1214 | 7115 8115.
• View - CEAT 3QFY22 was operationally weak largely due to weak demand and lower gross margins. However, CEAT is a play on healthy replacement/OE outlook going forward as supply chain normalizes, timely capacity addition and focus on market share gains in high margin segments like 2Ws, PCR and OHT (~60% mix over next 4-5 years). CEAT trades at ~13.1x of FY23 consol EPS. We have Buy rating on the stock with TP at Rs1,465. We shall revise our estimates post call tom.

Shares of CEAT Limited was last trading in BSE at Rs. 1133.45 as compared to the previous close of Rs. 1149.75. The total number of shares traded during the day was 11883 in over 2259 trades.

The stock hit an intraday high of Rs. 1152.00 and intraday low of 1118.00. The net turnover during the day was Rs. 13453334.00.

Source : Equity Bulls

Keywords

CEAT INE482A01020 Q3FY22Results FirstCut YESSecurities