(Reuters) – Indian tyre maker CEAT reported a bigger-than-expected fall in third-quarter profit on Wednesday, as higher rubber costs outweighed the benefits of strong demand for replacement tyres.
The company said consolidated net profit fell 46.5% to 971.1 million rupees ($11.25 million) for the quarter ended Dec. 31 from 1.81 billion rupees a year ago.
Analysts, on average, expected 1.33 billion rupees, as per data compiled by LSEG.
Revenue from operations rose 11.4% to 33 billion rupees, while total expenses grew about 16%.
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KEY CONTEXT
CEAT, whose clients include Tata Motors and Maruti Suzuki India, is the first listed Indian tyre maker to report results for the December quarter.
Analysts have noted that demand for replacement tyres persisted in the reporting quarter. This, along with price hikes, improved the company’s revenue.
However, rising prices of rubber cut into CEAT’s bottomline, as raw materials costs jumped about 25%. Lower tyre demand from original equipment manufactures also weighed.
Company said it passed on part of the rise in raw material costs in select categories during the quarter to customers.
PEER COMPARISON
Valuation (next 12 Estimates (next 12 Analysts’ sentiment
months) months)
RIC PE EV/EBITD Revenue Profit Mean # of Stock to Div
A growth growth rating* analyst price yield
(%) (%) s target** (%)
CEAT 17.19 7.64 15.42 26.18 Buy 14 0.90 0.99
MRF 21.81 10.39 10.82 11.70 Sell 4 0.94 0.18
Apollo Tyres 14.91 7.37 7.41 23.62 Buy 22 0.85 1.33
JK Tyre & 10.61 6.73 7.08 16.07 Buy 4 0.71 1.24
Industries
* The mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
OCTOBER-DECEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 86.3050 Indian rupees
(Reporting by Meenakshi Maidas in Bengaluru; Editing by Janane Venkatraman)
