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Published: May 15, 2024
Updated: May 15, 2024

CEAT Ltd

Launches Premier Tyres

With a view to improving its marketshare in the premium tyre segment, CEAT Ltd has launched a range of premium steel radial tyres which will be sold directly to consumers.

Revealing this at a conference call organized to discuss the April 2024 quarter performance, Arnab Banerjee, CEO and MD, added that the steel radial tyres that were earlier only manufactured and sold to Original Equipment Manufacturers (OEMs) will now be available for the aftermarket.

"Premium tyres have been a focus area for a few quarters and the category is moving well. Across categories, consumers are willing to pay more for these tyres. The steel radial tyres are 3 per cent of the overall motorcycle segment but are gaining saliency. The product is premium, including the technology that it offers.

The segment is margin accretive and we see a big opportunity. We would want to be market leaders in the segment.

Commenting on the results as well as the outlook of the business, Mr Banerjee said, "The company ended the year on a positive note. We saw recovery in volumes in the second half of the quarter in the replacement and international markets, with stable margins for the quarter and a significant improvement in the margins on a full-year basis, and expect the positive momentum in Q1FY25.

He continued, "We have achieved commendable growth, largely attributable to a share gain in passenger categories, both in 2W and 4W, and substantial expansion within the export segment. Overall, our profits and margins grew significantly during the year. The operating margins for the quarter include additional provision made towards Extended Producers Responsibility (EPR)-related requirements imposed on the tyre industry by the Government of India."

HEALTHY GROWTH

According to Mr. Banerjee, on a standalone basis, the company's revenue stood at Rs 2,979.2 crore and the EBITDA margin stood at 13.3%, a contraction of 89 bps vs Q3 FY23-24. Net profit stood at Rs 119.1crore. Volume growth in Q4 was 5.3% and FY24 6.5%, mainly driven by higher growth in 2W and PCR. Revenue from OEM was flat, while major growth came from replacement and export. Exports grew 22% in volume, mainly driven by demand from th Middle East and Brazil. The replacement business grew by 5%.

During the year the company saw a positive free cash flow, a significant reduction in debt, improvement in operating margins and the maintenance of healthy balance sheet leverage ratios.

Mr Banerjee added, "The company expects high singledigit to double-digit volume growth in all the segments in FY25. The commodity basket remained flatish in Q4 as compared to Q3. Now, natural rubber is seeing an escalation which can lead to a 3-4% RM cost increase in Q1. The overall demand situation is good, and Q1 is a positive season for all types of tyres. Rural and small towns are showing a revival."

n Q4, a marginal price increase was taken in Farm and PCR. In Q1 up to April, the company has taken a 1.5% price increase in replacement in all the segments to cover the RM price increase. The company will be taking a similar price increase in exports. The OEM price is based on a formula and with the lag, this will also be mitigated. Capex incurred during FY24 was Rs 860 crore and the target for FY25 is Rs 1,000 crore, including Rs 250 crore in maintenance capex.

TRUCK TYRES

Commercial production in Truck, Bus and Radial tyres (TBR) at the Chennai plant expected to start from Q2 and total TBR capacity will increase from 1,30,000 tyres per month to 1,75,000.

Current debt is around Rs 1,600 crore and the company is likely to keep the debt around this level. The export business is margin accretive, and the company's target is to take the share of exports to 25% from the current 19% in the next 2-3 years. During the quarter, some price correction was seen in the industry in the TBR segment but Ceat kept the price stable.

July 15, 2024 - First Issue

Industry Review

VOL XV - 23
July 01-15, 2024

Formerly Fortune India Managing Editor Deven Malkan Assistant Editor A.K. Batha President Bhupendra Shah Circulation Executive Warren Sequeira Art Director Prakash S. Acharekar Graphic Designer Madhukar Thakur Investment Analysis CI Research Bureau Anvicon Research DD Research Bureau Manager (Special Projects) Bhagwan Bhosale Editorial Associates New Delhi Ranjana Arora Bureau Chief Kolkata Anirbahn Chawdhory Gujarat Pranav Brahmbhatt Bureau Cheif Mobile: 098251-49108 Bangalore Jaya Padmanabhan Bureau Chief Chennai S Gururajan Bureau Chief (Tamil Nadu) Ludhiana Ajitkumar Vijh Bhubaneshwar Braja Bandhu Behera

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