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CEAT reported strong operating performance for 2QFY2012; however, the
company’s bottom line was severely impacted due to high interest and
depreciation expense because of commissioning of the new facility at Halol.
The company returned back to profitability in 2QFY2012, after reporting losses at
the operating as well as bottom-line front in 1QFY2012. We broadly maintain
our estimates and retain our Buy rating on the stock.
Continuous ramp-up at the Halol plant improves operating performance: During
2QFY2012, the company’s net sales grew strongly by 32.7% yoy (3.7% qoq) to
`1,118cr on account of availability of additional capacity at the Halol plant and
average price hike of ~10% in 1QFY2012. OEM and exports sales registered
impressive growth of 57% and 90% yoy, respectively, while replacement sales
grew by 14% yoy. Top-line growth also benefited from a 21.4% yoy increase in
other operating income. Operating margin improved by 27bp yoy to 5.5%,
largely due to ramp-up at the Halol facility and price increases carried out in
1QFY2012. While raw-material cost as a percentage of sales increased by 223bp
yoy, the decline in staff cost and other expenditure as a percentage of sales (by
129bp and 132bp yoy, respectively) helped CEAT to maintain its margins. Net
profit, however, fell sharply by 63.3% yoy to `6cr due to significant rise in
depreciation (114.4% yoy) and interest (170.4% yoy) expense.
Outlook and valuation: We expect CEAT to report continuous improvement in its
operating performance, led by improving utilization at the Halol plant and a
gradual decline in raw-material prices. Consequently, we estimate CEAT to post
an EPS of `20.8 in FY2013E. We maintain our Buy recommendation on the stock
with a target price of `104.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CEAT reported strong operating performance for 2QFY2012; however, the
company’s bottom line was severely impacted due to high interest and
depreciation expense because of commissioning of the new facility at Halol.
The company returned back to profitability in 2QFY2012, after reporting losses at
the operating as well as bottom-line front in 1QFY2012. We broadly maintain
our estimates and retain our Buy rating on the stock.
Continuous ramp-up at the Halol plant improves operating performance: During
2QFY2012, the company’s net sales grew strongly by 32.7% yoy (3.7% qoq) to
`1,118cr on account of availability of additional capacity at the Halol plant and
average price hike of ~10% in 1QFY2012. OEM and exports sales registered
impressive growth of 57% and 90% yoy, respectively, while replacement sales
grew by 14% yoy. Top-line growth also benefited from a 21.4% yoy increase in
other operating income. Operating margin improved by 27bp yoy to 5.5%,
largely due to ramp-up at the Halol facility and price increases carried out in
1QFY2012. While raw-material cost as a percentage of sales increased by 223bp
yoy, the decline in staff cost and other expenditure as a percentage of sales (by
129bp and 132bp yoy, respectively) helped CEAT to maintain its margins. Net
profit, however, fell sharply by 63.3% yoy to `6cr due to significant rise in
depreciation (114.4% yoy) and interest (170.4% yoy) expense.
Outlook and valuation: We expect CEAT to report continuous improvement in its
operating performance, led by improving utilization at the Halol plant and a
gradual decline in raw-material prices. Consequently, we estimate CEAT to post
an EPS of `20.8 in FY2013E. We maintain our Buy recommendation on the stock
with a target price of `104.
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