CEAT

The company posted a good set of numbers for Q2FY14, helped by lower rubber prices, stable demand and more importantly, due to the change in product mix to higher margin non-truck tyres. Consolidated net sales rose 8% (YoY) at Rs.1312 crore. Total operating costs, as a peecntage of total sales came down from 94% to 88% (YoY). EBITDA margin almost doubled from 7.2% to 13.8%. It ended the quarter with a net profit at Rs.77 crore, up 19 times! But this is thanks to the lower base effect as net profit in Q2FY13 was affected due to the exceptional expense of Rs.14 crore. Though if we look at the increase before deducting the exceptional expense, the rise was 6 times. In current Q2, tax outgo has jumped up from Rs.2.46 crore to Rs.37 crore and this was on account of Rs.7 crore included of prior credit in Q4FY13.

The company continues to have a large debt. Though the company had managed to cut down debt by Rs.400 crore in FY13, it has gone up in current Q2. It presently stands at Rs.1086 crore, up from Rs.829 crore (YoY). Its interest outgo for H1FY14 stood at Rs.93 crore. The net profit of the company at Rs.142 crore in H1Fy14 has already surpassed Rs.120 crore for FY13. The company plans to expand its facilities at Halol and plans to invest additional Rs.650 crore to increase the capacity of radial tyre to 120 tonne per day. It is planning to set up an office in Indonesia and also in Africa as it feels having an office in these regions will directly boost its exports by 7-8%. It hopes to increase the share of its exports from the present 20% to 23-24% soon.