Edelweiss' research report on CEAT
Net revenue, at INR13.8bn, up 5% YoY (tonnage growth of 11% YoY and realisation decline of 6% YoY), was in line with our estimate. EBITDA/tonne, at INR 21K (our estimate INR 23K), was affected by gross margin miss (41.2% versus our estimate of 42.0%) given sharp increase in rubber prices and adverse mix. Reported PAT, at INR942mn, down 20% YoY was 2% above our estimate given higher other income (dividend from Sri Lanka subsidiary at INR 160mn).
OutlookWe introduce FY19E EPS at INR 143. CEAT is well placed to capitalise on burgeoning 2W and passenger segment demand. Despite capex of INR5bn per annum, FY19E D/E will be comfortable at 0.2x. We estimate the company to report FY17-19E EPS CAGR of 24% and RoE of 20% in FY19E. We maintain ‘BUY’ with TP of INR 1,429 (earlier INR 1,590). At CMP, the stock trades at 11x/8x FY18/19E PER.
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