CEAT

RPG Group’s tyre manufacturing arm CEAT Ltd. reported flat revenue growth during first quarter ended 30-6-15, which on consolidated basis, stood at Rs. 1,456, down 2% QoQ. However, lower input cost and better product mix expanded EBITDA margin to 16% from 13% in Q4FY15, leading to 21% higher EBITDA of Rs. 233 crore. Lower leverage helped reduce finance cost 7% sequentially to Rs. 25.6 crore, resulting in 29% higher PAT of Rs. 121 crore, one of the highest in the past 6 quarters.

Company’s consolidated EPS for Q1FY16 came in at Rs. 29.92, while FY15 EPS stood at Rs. 84.62. Lower input prices and declining debt should keep margins going forward. Share is currently ruling at a PE multiple of approximately 7 times, based on FY16 expected earnings, which is very attractive, given the company’s manufacturing capacity of 800 tonnes per day, wide product basket and leadership position in light truck and truck tyre market.