Ceat Ltd.'s share price declined 7% to its lowest in nearly two months as net profit declined in the July–September quarter and margins took a hit due to high rubber prices and employee costs.
The tyre manufacturer's net profit fell 42% to Rs 121.5 crore in the quarter ended Sept. 30. Analysts' consensus estimates compiled by Bloomberg projected Rs 142 crore.
Ceat's revenue during the quarter under review rose 8.2% to Rs 3,304.5 crore from Rs 3,053.3 crore in the corresponding quarter of the previous fiscal. The Bloomberg estimate was Rs 3,301 crore.
The earnings before interest, taxes, depreciation and amortisation fell to Rs 362.3 crore, whereas the Ebitda margin contracted to 11% from 14.9%.
Natural rubber prices locally reached a 15-year high, a significant premium to global rates, and impacted the company, said Ceat CFO Kumar Subbiah, adding the prices have now peaked and are likely to drop.
Raw material costs shot up by 6% sequentially in the second quarter and the company expects prices to advance another 2-2.5% in the next quarter, he told NDTV Profit. "We’ve taken some price increases to mitigate impact of increase in raw material prices. We are also controlling discretionary costs."
Subbiah also said annual increment cycle happens in July and on the base of the second quarter, there will not be any major employee costs impact for the whole fiscal year.
Ceat Share Price Movement
Ceat share price fell as much as 7% intraday to Rs 2,668 apiece, the lowest since Aug. 22.
Ceat share price fell as much as 7% intraday to Rs 2,668 apiece, the lowest since Aug. 22.
Ceat share price fell as much as 7% intraday to Rs 2,668 apiece, the lowest since Aug. 22. The scrip pared losses to trade 0.4% lower at Rs 2,881.4 by 10:00 a.m. The benchmark NSE Nifty 50 was also down 0.4%.
The stock has risen 30% in the last 12 months and 18% on a year-to-date basis. The total traded volume so far in the day stood at 6.8 times its 30-day average. The relative strength index was at 42.
Thirteen out of the 23 analysts tracking Ceat have a 'buy' rating on the stock, five recommend a 'hold' and five suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price target of Rs 3,064 implies a potential upside of 5%.
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