Ceat’s Disappointing Results Trigger Sector-Wide Decline in Tyre Stocks
Stocks of Tyre Companies like Apollo Tyres, Ceat Tyres, MRF and JK Tyres are bleeding red on Friday. Ceat ended the session down by 3%, here’s why!
The top tyre stocks in Indian markets include Ceat, Apollo Tyres, MRF, JK Tyres and Balkrishna Industries. All these are trading down by between 1-4% on Friday. Ceat ended lower by nearly 3% from its previous day’s closing price after the tyre company reported an 18% decline in net profit to Rs.109 crores in its net profit for Q4 FY 2023-24.
Below expected results from Ceat Tyres
Tyre maker Ceat whose customers include Mahindra and Mahindra and Maruti Suzuki. Company’s net profit plunged by 22.8% YoY and 43.6% QoQ. The net profit for the Q4FY24 stood at Rs 102 crore as against Rs 132 crore in Q4FY23. The Revenue from operations rose to Rs 2,992 crores in this quarter as compared to Rs.2,875 crores in Q4 FY 2022-23. The Company’s EBITDA for this quarter rose to Rs.401 crore in this quarter from Rs.376 quarter in Q4 FY 2022-23. The EBITDA margins for the quarter stood at 13.4% slightly higher than the 13.1% reported in Q4 FY 2022-23. EBITDA margins were impacted by higher other expenses led by EPR related provisions The board has also announced a dividend of Rs.30 per share. These mixed results led to a fall of 9% in the stock in the morning session, Currently, the stock is down by 4%.
| Parameters | Q4 FY 2023-24 | Q4 FY 2022-23 | Change (in%) |
|---|---|---|---|
| Revenue from operations | Rs.2,992 crores | Rs.2,875 crores | +4% |
| EBITDA | Rs.401 crores | Rs.376 crores | +6.8% |
| EBITDA Margins | 13.4% | 13.1% | +0.3%(30 Bps) |
| Net Profit | Rs.102 crores | Rs.132 crores | -23% |
Impact of Ceat Results on the Whole Tyre Sector
Yesterday, Ceat became the first tyre company to announce its Q4 earnings, the company reported a mixed bag of results with a fall in net profits on a YoY and sequential basis dampening the sentiment. Due to this other tyre companies are also bound to remain in pressure with their upcoming results and the majority of tyre stocks are trading lower from their previous day closing price.
Conclusion
For this quarter domestic sales of overall vehicles have been up by 20% but prices of rubber which is a key component in tyre manufacturing have risen by roughly 10% in the quarter. This will lead to an increase in raw material costs and can hamper the profitability of tyre companies. Streets are expecting that other tyre companies like MRF, and Apollo Tyres may also report a fall in net profits due to this.
Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.