Consolidated revenue increased by 14.3% YoY, driven by healthy volume growth in the replacement and OEM segment. International demand was impacted due to global macro-economic conditions while elevated input cost continued to impact margins as gross margin and EBITDA margin declined by 483bps YoY/174bps YoY respectively. Reported PAT remained flat, impacted by EPR related expenses. In comparison to previous year the performance remains weak, however, sequentially the performance seems to have stabilized because of recovery in OEM demand and flattish input cost.
The management remains bullish on long-term tyre demand in India, supported by infrastructure investments and EV adoption. CEAT is capitalizing on premiumization trends with high-end product launches and plans to maintain ~20-25% market share in the EV OEM segment. Despite near-term softness in urban demand, rural markets and the commercial vehicle segment offer optimism. Challenges persist in international business, particularly in Latin America and North America, although Europe, Middle East, and Southeast Asia continue to be stable growth contributors. We project revenue/EBITDA/PAT to grow at 16%/23%/29% CAGR over FY25-27E. We maintain our ‘Hold’ rating with a revised target price of Rs3,240 (previous Rs2,700), valuing it at 16x on its Mar’27E EPS.
§ Robust realization leads to strong topline growth: Q4FY25 revenue was at Rs34.2bn against PLe/BBGe of Rs32.2bn/Rs33.4bn, driven by double-digit volume expansion in OEM segment and high single digit growth in the replacement segment. PAT was reported at Rs 0.9bn (PLe: Rs 1.1bn; BBGe: Rs 1.2bn), lower than the expectations owing to expenses related to EPR provisions.
§ Sequential recovery in margin: Gross profit was Rs 12.8bn (PLe: Rs 12.3bn) while EBITDA was Rs 3.9bn (PLe: Rs 3.6bn; BBGe Rs3.6bn). High input cost as compared to same period last year impacted its gross margin/EBITDA margin, however, sequentially the company reported 101bps improvement in EBITDA margin owing to stable RM cost sequentially and price hikes taken during previous quarters.
§ Gradual recovery in profitability: The management expects raw material prices to remain stable during Q1FY26 while Q2FY26 is expected to see favorable improvement in RM prices which shall aid in sustaining and improving margin going forward. Additionally, it aims to expand its product offering in higher-rim-sized vehicles which shall result in better realization and better profitability.
