- 16 Jan 2025
- ICICI Securities
INDUSTRY PLAYER REPORTS EROSION IN MARGINS DUE TO HIGHER RM COST
News: Tyre major CEAT reported muted performance in Q3FY25. Consolidated net sales for Q3FY25 came in at ₹ 3,300 crore (up 11.4% YoY and down 0.1% QoQ). Gross Margins for the quarter declined by 59 bps QoQ to 36.8% owing to high raw material cost. EBITDA for the quarter stood at ₹ 341 crore with EBITDA margins at 10.3%, down ~63 bps QoQ and ~375bps YoY. PAT for the quarter stood at ₹ 97 crore down ~47% YoY and 20% QoQ. The company also announced a capex of ₹400 crore to increase capacity by 30% in its Nagpur plant by the end of FY27-28.
Views: CEAT had guided for the inflationary trend on RM basket to continue but on a lower rate of 1.5% to 2%, Q3 on Q2 which would enable them to create space to enhance their margin with calibrated price hikes. Therefore, as expected the margins have declined QoQ. The company expects the RM basket to be flattish in Q4FY24 and expect their growth momentum to continue. The key monitorable would be the commentary of other players on RM basket bottoming out in Q3FY25. Company’s topline growth was encouraging with healthy growth witnessed across replacement and export markets with OEM on recovery.
Impact: Neutral