CEAT - 4QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst- Automobile, Angel Broking) on CEAT 4QFY2014 results:

Ceat results in-line with estimates

Ceat reported strong results for 4QFY2014 which were broadly in-line with our estimates. The overall performance was driven by a healthy volume growth of 7.8% yoy, improvement in operating margins at 11.1% (as against 10.6% in 4QFY2013) and decline in interest cost. Top-line for the quarter grew at a healthy rate of 7.4% yoy (1.6% qoq) to Rs.1,408cr, which was marginally lower than our expectations of Rs.1,452cr. The top-line performance was impacted mainly due to the decline in net average realization by 0.2% yoy (1.9% qoq). The volume growth, however, remained healthy as it grew by 7.8% yoy (3.4% qoq) led by the new OEM partnerships like Royal Enfield, Volvo-Eicher and Bajaj Auto and also on account of strong exports performance. EBITDA margins improved 43bp yoy (flat qoq) to 11.1%, broadly in-line with our estimates of 11.5%, led by improved product-mix. While, raw-material and employee cost as a percentage of sales declined 110bp and 90bp yoy respectively, other expenditure as a percentage of sales surged 160bp yoy during the quarter. We would await more clarity from the Management on sharp surge in other expenditure. On the positive side interest expense declined 12.3% yoy (15.4% qoq) aiding the bottom-line performance, which increased 12.7% yoy to Rs.69cr (adjusted basis), broadly in-line with our expectations of Rs.67cr. During the quarter, the company recorded an exceptional charge of Rs.10cr related to VRS for employees and provision for loss due to the fire at Bhandup facility. We retain our positive view on the company and believe that the company will continue to benefit from the new OEM partnerships and expected stability in raw-material prices. The stock is currently trading at 4.2x FY2016E earnings. We maintain our Buy rating on the stock with a target price of Rs. 487.

Ceat 4QFY2014 Result Review (CMP: Rs.409 / TP: Rs.487 / Recommendation: Buy)

Shares of CEAT LTD. was last trading in BSE at Rs.379.45 as compared to the previous close of Rs. 388.55. The total number of shares traded during the day was 87372 in over 4026 trades.

The stock hit an intraday high of Rs. 388 and intraday low of 371.1. The net turnover during the day was Rs. 33256517.

Source : Equity Bulls

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