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ICICI Securities pegs 20% upside in Ceat despite 77% dip in Q2 profit. Here's why

The Ceat board at a meeting held on Monday approved the raising of up to Rs 500 crore through debt securities on private placement.

October 26, 2021 / 12:11 PM IST
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Ceat share price was trading lower by over 4 percent intraday on October 26, a day after the company declared its September quarter earnings.

The tyre maker on October 25 reported a 77 percent decline in consolidated net profit at Rs 42.28 crore for the the second quarter ended September 30, impacted by higher expenses, specially cost of materials consumed.

The company, which had posted a consolidated net profit of Rs 182.18 crore in the same quarter last fiscal, also said that its board at a meeting held on Monday approved the raising of up to Rs 500 crore through issuance of debt securities on a private placement basis.

Consolidated revenue from operations during the quarter under review stood at Rs 2,451.76 crore as against Rs 1,978.47 crore in the year-ago period, Ceat Ltd said in a regulatory filing.

Total expenses were higher at Rs 2,401.64 crore as compared to Rs 1,814.89 crore in the corresponding period last fiscal.


The stock was trading at Rs 1,238.50, down Rs 54.90, or 4.24 percent, at 11:37am. It has touched an intraday high of Rs 1,249 and an intraday low of Rs 1,165.

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The scrip was trading with volumes of 12,820 shares, compared to its five day average of 10,227 shares, an increase of 25.35 percent.

On the fund raising, Ceat Ltd said it will issue non-convertible debentures (NCDs) which can be listed/unlisted, secured/unsecured or such debt securities on a private placement basis in one or more tranches.

According to domestic research and broking firm ICICI Securities, Ceat's Q2 FY22 performance was below consensus expectations and profitability suffered (down 79 percent YoY) mainly due to gross margin compression (down 975 bps YoY). Growth momentum continues to be led by organic growth in CV and PV segments coupled with new PV order wins.

"Outlook for H2FY22 remains mixed due to worries on potential demand slowdown caused by OEM production cuts on account of chip shortages. However, margins are likely to improve in H2 as price hikes are more amenable while inputs costs have softened a bit (Bangkok rubber prices down 23 percent since Q1FY22)," it said.

"We expect FCF generation to improve in FY23 and maintain 'add' rating on the stock with a revised target price of Rs 1,480, an upside of over 19 percent current market price," the brokerage said.

Disclaimer: The views and investment tips expressed by investment experts on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Oct 26, 2021 12:11 pm

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