CEAT Ltd Quarterly Results Q3 FY 25 stock analysis

Home » Financial News Hotbox » Results » CEAT Ltd. – Q3FY25 Result Update

Check out the latest Result of CEAT Ltd for Q3FY25

Sector Outlook: Netural

Revenue growth maintains momentum; Margins under pressure

CEAT delivered a mixed performance this quarter, with strong revenue growth but weak results in other areas. Consolidated revenue rose to ₹32,999 million (up 11.4% YoY), driven by double-digit growth in replacement, export, and OEM segments, supported by a good mix of volume and price increases. Domestically, rubber prices fell from ₹250/kg to ₹190/kg during the quarter, while international rubber prices stayed between $1,900 and $2,000, which is $150-$200 above the normal range. Gross margins were 36.8% (down 450 bps YoY / down 59 bps QoQ), impacted by raw material costs. Despite a decline in raw material prices, the company couldn’t fully recover the savings, leading to a gross margin drop of about 60 bps.

EBITDA stood at ₹3,409 million (down 18.3% YoY / down 5.9% QoQ), with a margin of 10.3% (down 376 bps YoY / down 63 bps QoQ), affected by lower gross margins and the inability to pass on rising costs to customers. Employee expenses were lower compared to previous quarters. Net profit (PAT) was ₹916 million (down 47.1% YoY / down 20.9% QoQ), missing market expectations of ₹1,023 million. Volumes grew 7.9% YoY, driven by double-digit growth in replacement and export segments and mid-single-digit growth in the OEM segment. The 2W and PV segments showed growth, but this was partially offset by a decline in the CV segment. Debt decreased by ₹50 crores, from ₹1,885 crores to ₹1,835 crores, by the end of the quarter.

Key Concall Highlights

The company saw strong growth in the two-wheeler and scooter markets nationwide, achieving good capacity utilization of 75% to 80% at most plants, sometimes exceeding 80%.
OEM growth is expected to pick up in the two-wheeler and four-wheeler segments, while growth in the TBR segment is expected to stabilize. However, OEM volumes in the MHCV segment remain negative.
The company forecasts truck-bus segment growth in high single digits, two-wheeler growth in double digits, and farm and passenger vehicle growth in low single digits in the coming quarters.
Plans to build a new facility in Nagpur, India, with a capacity of 27 million tyres per year for 2W/3W segments, are underway. A capex of ₹4 billion is allocated, with completion expected by FY27-28, funded through internal accruals and debt.
The company’s 17-inch-plus rim tyres are expected to account for 25% of OE fitment in the next few quarters.
A new scooter tyre, Secura Life, was launched, offering long product life without compromising grip.
Price hikes of 1% to 1.5% were implemented in Q3 for commercial and farm segments, and 4% for passenger replacement. No price hikes were made for two-wheelers in Q3, but increases began in January.
The acquisition of Camso is set to close by May (Q1 FY26), boosting the company’s international business to over 25% saliency. This acquisition will not impact Q3 or Q4 FY25 results.
The company’s go-to-market strategy in the US is progressing well, with regional distributors onboard and positive product feedback. Growth is anticipated in the US TBR segment, with commitments from channel partners expected to boost FY26 performance.

Valuation and Outlook

CEAT delivered a weak financial performance in Q3FY25, falling short of market expectations. While revenue showed growth, gross profit, EBITDA, and net profit declined significantly. Key challenges included rising raw material (RM) costs and the inability to fully implement price hikes. International markets faced hurdles due to geopolitical tensions in the Middle East and currency depreciation in Brazil, which impacted performance. However, the company showed strong results in the US and European markets, maintaining a positive outlook for these regions. A planned price hike in the next quarter aims to offset RM inflation, but heightened competition and uncertain commodity prices may delay margin recovery. Revenue growth is expected to sustain, supported by a favourable volume mix and pricing, though volumes may be pressured by slowing OEM demand. The Camso acquisition is expected to close by Q1FY26, with no immediate impact on current quarters. This deal is significant as it will boost the OHT segment mix from 15% to ~25-26% and improve margins. Looking ahead, we remain cautious as margin pressures are likely to persist due to ongoing RM cost uncertainties.