Ceat extends rally for third day; surges 14% on healthy outlook

Shares of Ceat hit a new high of Rs 2,948, as they surged 14 per cent on the BSE in Saturday’s intra-day trade aftert the tyre maker announced its foray into steel radial tyres for two-wheelers.

The stock was trading higher for the third straight day, zooming 22 per cent during this period. In past one month, it has rallied 41 per cent. In comparison, the S&P BSE Sensex was traded flat at 71,698 at 12:56 PM.

Ceat on Friday launched its new premium range of two-wheeler steel radial tyres, targeting both aftermarket and original equipment manufacturer (OEM) segments. The company aims to enhance its leadership position in the overall two-wheeler tyre segment and also to help premiumise the brand, PTI reported.

Ceat, the flagship company of RPG Enterprises, is one of India’s leading tyre manufacturers and has a strong presence in global markets. Ceat produces more than 4.1 crore high-performance tyres, catering to various segments like 2-3 wheelers, passenger and utility vehicles, commercial vehicles and off-highway vehicles.

Ceat reported improvement in the operating performance with EBITDA margin expanding by 757 bps to 14.1 per cent during the first half of financial year 2023-24 (H1FY24). In H1FY24 total operating income increased by 4.85 per cent to Rs 6,002 crore.

The improvement was supported by volume growth in passenger vehicle (PV) and Off-Highway segment, despite high input prices. The prices of key raw material have softened in the recent past and the effect of the same has been visible since Q4FY23 with EBITDA margin in the range of 12-15 per cent.

Going forward the company is expected to maintain its growth momentum due to growing demand and large capacity additions done during capital expenditure (CAPEX) execution between FY19-FY24, according to analysts.

CARE Ratings expects an enhanced EBITDA margin profile due to an improvement in the product mix caused by the new facilities considerably ramping-up operations in FY24-FY25.

The Indian tyre industry has witnessed intense competition between the domestic players and the Chinese tyre manufacturers. The level of competition by international players is significantly higher in the T&B segment which is price sensitive.

However, measures taken by the government like imposition of anti-dumping duty (implemented in September 2017) and anti-subsidy countervailing duty (implemented in July 2019) on tyre imports from China have helped the Indian tyre manufacturers. Diverse product offerings and strong focus on the replacement market have enabled the company to sustain the established market position. However recently there has been some increase in cheap imports from Thailand, the rating agency said in rationale.