CEAT zooms on 5x rise in Q4 profits, surprise gross-margin growth

CEAT rose more than 5.5 percent in the morning trade on May 5, a day after the tyre-maker reported an impressive growth in earnings in the fourth quarter of the financial year 2023-24.

The tyre company reported a whopping 420.7 percent year on year (YoY) growth in net profit at Rs 132 crore against Rs 25.4 crore in the year-ago period. Net profit for FY23 was Rs 182.4 crore, up 158.4 percent from Rs 70.6 crore in the previous fiscal.

Consolidated revenue for the quarter grew 10.9 percent YoY to Rs 2,875 crore and EBITDA margin rose 553 basis points (bps) YoY to 13.1 percent.

One basis point is one-hundredth of a percentage point.

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Industry experts were particularly impressed with the gross margin expansion to 40.1 percent, increasing 658 bps YoY and 556 bps QoQ.

According to them, tyre companies had guided for a 3-4 percent fall in raw-material prices but their prices corrected by 8-9 percent, which could be due to the fall in crude prices.

Crude prices fell from $80.92 a barrel to $78.54 from January 2023 to March 2023, which was below FY23’s average of $93.15, according to PPAC data.

“We are hopeful that the coming quarters will see further uptick in growth, as commodity prices remain stable, and the global inflation slows down. We have ended the year on a positive with margins back to double digits,” vice chairman Anant Goenka said.

He said that the company has crossed Rs 10,000-crore revenue mark (for the full year) during the quarter. Consolidated revenue for FY23 was Rs 11,263 crore.

Goenka said the 21 percent growth in revenue delivered in FY23 came from both volume and price.

“Our growth during the year was largely driven by OEMs and specialty & passenger category tyres,” he said, referring to original equipment makers.

The company’s revenue mix in FY23 changed in favour of the OEM vertical, going by its investor presentation. In FY23, 29 percent of the revenue came from the OEM vertical against 24 percent in FY22. As much as 53 percent of the revenue came from replacement market against 56 percent a year ago and 18 percent from the exports market against 20 percent in the previous year.

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“On exports, we continue to face pressure as a result of the global economic headwinds, largely spurred by the ongoing war and the currency devaluation. However, we have begun to see some recovery in exports and the replacement market, especially in the commercial category,” he said.

At 12.04 pm, the stock was trading at Rs 1,718 on the National Stock Exchange, 3.7 percent higher than the previous close.

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