Ceat hits record high; zooms nearly 100% in three months

The stock appreciated by nearly 100% from Rs 614 on June 9, to Rs 1,213 compared to 3.2% decline in CNX Nifty.

Ceat has moved higher by 6.4% to Rs 1,213, also its record high on the National Stock Exchange (NSE) on the back of heavy volumes.

The trading volumes on the counter more than doubled with a combined 1.99 million shares changed hands on the BSE and NSE till 01:56 PM.

In past three-months, the market price of auto tyres & rubber products maker has appreciated by nearly 100% from Rs 614 on June 9, 2015. The CNX Nifty dipped 3.2% during the same period.

The stock rallied 61% from Rs 755 on July 21, after reported over two-fold rise in its consolidated net profit at Rs 121 crore for the first quarter ended June 30 (Q1FY16). The company had posted a net profit of Rs 52 crore during the same period of the previous fiscal.

The consolidated earnings before interest, tax, depreciation and amortization (EBITDA) margins rose to 15.4% in Q1FY16 compared to 9.3% in Q1 last year, largely due to lower raw material cost coupled with improving product mix.

“Leverages ratios improved further in June quarter. Debt/equity has come down from 1.0 times in Q1 last year to 0.4 times in June 2015 quarter. Debt to EBITDA has improved from 2.1 in Q1 last year to 0.8 times this quarter,” said Anant Goenka, Managing Director, Ceat.

Mayur Milak, Research Analyst at Anand Rathi Research said, the company’s gradual shift toward two- and three-wheelers and to the passenger-vehicle sub-segments has not only provided it with steady revenue growth but also supported significant margin improvement.

“Ceat has decided to strategically focus more on the passenger-vehicle, and two- and three-wheeler sub-segments. This we believe gives it a dual advantage. One, it avoids competition from its peers (including the Chinese), which are all aiming at commercial vehicle (CV) radials. Two, it strengthens its leading position in two-wheelers,” analyst said in a recent research report.