About the company

CEAT Limited, one of India’s leading tyre manufacturing company in India. The company’s product range comprises of tyres for commercial segments like trucks, buses, Light Commercial Vehicles(LCV), as well as Passenger cars , SUVs and Two & Three Wheeler tyres for domestic use, radial and cross ply. In the specialty segment CEAT manufactures Mining, Farm and Earthmover, Industrial &Construction Equipment tyres and other special application Off the Road tyres.

In India, CEAT is the largest supplier OEMs particularly in SUV, LCV, Truck and the Tractor segment. CEAT has been exporting tyres since 1964, which has helped it in getting solid grip in the export market. Today ALTURA / CEAT tyres are put to service in more than 102 countries across the globe.

Its main export markets are

• North America
• South America
• South East Asia
• Middle East
• Asia

Over 100 + new products were launched in the year 2014-15, building on CEAT’s position as a premium innovative player in the OEM market for TW, PC tyres and CV tyres. CEAT also introduced additional products in its premium tyre range.

Some of the product developments initiated by the Company are:

• Development for ‘CZAR SPORT’, an asymmetric sports tread pattern for ‘cross-over’ vehicles and Motocross tyres for motorcycles resulting in entry into emerging and niche segments.
• Development of a special TBR for meeting high-heat, high-speed and overload performance was carried out for the Middle East region.
• In Truck & Bus Radials (TBR) segment, durability improvement and development of resistant radial tyre compounds were carried out to meet the demanding conditions in Indian market.
• Launch of new tyres for premium models for Maruti Suzuki and premium UV of Mahindra & Mahindra in car & UV radial tyres and Daimler in truck radial tyres.

CEAT Limited is in a list of Multibaggers Stock in Dynamic Levels, the share price has touched a 52 week high of Rs. 1320 on 07-Oct -2015 and a 52 week low of Rs. 595 on 09-Jun-2015.

CAPACITY EXPANSION

CEAT Limited has undertaken a capacity expansion of 11,000 Tyres / day in its plant at Halol in the State of Gujarat at an estimated capital outlay of 65,000 Lakh to produce passenger radial tyres. Further, the Company proposes to set up a green field project of an initial capacity of 40,500 Tyres / day near Nagpur in the State of Maharashtra at a capital outlay of 42,000 Lakh to manufacture 2/3 Wheeler tyres.

• Nagpur plant commissioned 15 MT/day capacity in March 2016; total capacity of 120 MT/day.
• Halol Phase II plant commissioned 39 MT/day as on March 2016; total capacity of 120 MT/day.

Financial

On consolidated basis, Ceat recorded operating profit of Rs.715.79 Crs FY 2016 with a growth of 21.89 % over Rs.587.21 Crs of the last fiscal. The Company recorded a net profit of Rs. 446.49 Crs FY 2016 reflecting a growth of 25 % over net profit of Rs.317.18 Crs of the last fiscal.

Conclusion

The Indian automobile industry faced and contracted demand during the year 2015, mainly in farm and commercial segment. However demand for passenger cars and 2- wheelers have shown a positive growth.

A slowdown in demand in china, the world biggest consumer of rubber, along with increased supply in markets such as Thailand, has kept international rubber prices on a tight leash. The drop in crude oil prices triggered a price decline for the crude based raw material as well. This helped the industry to register respectable margins.

Tyre Industry turnover in India is Rs 50,000 crore, Bus & Truck segment accounts for 55% of the industry’s revenues and India exports Rs 10,500 crore worth of Tyres.

CEAT is a major exporter of tyres for trucks, off-the-road (OTR) vehicles and Light Commercial Vehicle categories. It exports products to different markets across the world, with many of the exported tyres exclusively developed for these markets. Specially designed tyres for export markets include tyres with, ride comfort, excellent mileage and low noise for the Dubai taxi market, as well as the low noise tyres that surpass the stringent requirements under European regulations.

The Indian Tyre Industry is expected to register a better growth during the fiscal 2016, taking into account the positive macroeconomic conditions and estimated growth of automobile industry. Passenger car, Motorcycle and Bus/ Truck are projected to show a growth of 7 – 9%, while scooter and small commercial vehicles are anticipated to show double digit growth in near future.

The raw material prices are expected to be stable and may help tyre manufacturing companies to maintain operating margins.

As per our estimate, the stock at CMP of 1015 is trading at P/E of 9.27, The Debt Equity ratio is 0.37 which indicates the company is operating with a rational level of debt and may not have problem to meet its obligations. The Interest coverage ratio is of 5.33 which indicate that Ceat has been producing sufficient for the shareholders after servicing its debt obligations. The return on equity is 18.95 % and return on asset is 9.81%.

On the basis of above factors we recommend a buy in CEAT Limited for long term with a target of Rs.1300.

To get more Support and Resistance levels of the share please visit CEAT Share Price Forecast