A report on Equity Research of CEAT Ltd.

1. Bhagwati Maurya
CEAT Dr.Annie Besant Road, Worli, Mumbai 400 030
EQUITY RESEARCH REPORT

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1 Equity Research Report
A Report on
Equity Research Analysis of CEAT Ltd.
Prepared by
Bhagwati Maurya
Year: 2019 – 20

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2 Equity Research Report
About Company
Registered Address:
463, Dr. Annie Besant Road, Worli,
Mumbai: 400 030
Email: investors@ceat.com
Telephone: 22 2493 0621
Key People’s
Harsh Goenka Chairman
Anant Goenka Managing Director & CEO
Arnab Banerjee Chief Operating Officer
Atul C Choksey Independent Director
Company’s Background
Industry Tyres & Tubes
House Name/Group RPG Group
Year of Incorporation 10th
March 1958
Auditors: S R B C & Co. LLP
Listed on: Bombay Stock Exchange (BSE) & National Stock Exchange (NSE)
Rating: CARE A1
Price (July 8th
2019): 904.90
Target Price: 1500 (for 12 Months)
52 Week Low/High: 872.05 – 1455.00
Market Cap (Rs. Cr.): 3,660.33

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3 Equity Research Report
Overview
Mumbai Headquartered CEAT (Cavi Elettrici e Affini Torino), the flagship
company of RPG Enterprises, was established in 1958. Today, CEAT is one of
India’s leading tyre manufacturers and has strong presence in global markets.
CEAT produces over 15 million tyres a year and offers the widest range of tyres
to all segments and manufacturers world-class radials for: heavy duty trucks
and buses, light commercial vehicles, earthmovers, forklifts, tractors, trailers,
cars, motorcycles, and scooters as well as autorickshaws.
It has its own core values: CAIRO
World Wide Network:
CEAT marks the highest exports from India in truck, OTR and LCV categories to
over 130 countries.

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Price Performance: 5 Years
Company’s Price History shows an upswing in its share price of 5 yrs. Trend.
Capital Structure: Company has Authorized Capital of Rs. 46.1 Cr. & Issued
Capital of Rs. 40.45 Cr. Whereas PAID Up Capital is 40.45.
Dividend Summary: For the year ending March 2019, Ceat has declared an
Equity Dividend of 120.00% amounting to Rs. 12 per share. At the current share
price of Rs. 903.70 this results in a Dividend Yield of 1.33%.
Shareholding Pattern:
The Float of Stock is comprises of “General Public” and “Others” which is
“10%” and “6%”, available for trading.
47%
25%
10%
6%
5%
5%2%
Percentage
Promoters
Foreign Institutions
General Public
Others
NBFC & Mutual Funds
Foreign Promoters
Financial Institutions

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Competitive Analysis
The top competitors of CEAT Ltd. are “Apollo Tyres” and “JK Tyres and Ind.”.
(Rs. In Cr.)
Particulars/Name
of the Company
Market
Cap.
Sales
Turnover
Net
Profit
Total
Assets
P/E
Ratio
Earnings
Per
Share
Apollo Tyres 10660.15 12353.77 592.11 10378 12.9 14.6
CEAT Ltd. 3660.33 6831.30 288.91 3968.07 13 69.7
JK Tyres and Ind. 1877.51 7613.35 204.40 5005.19 8 9.5
Market Capitalization of Apollo tyres is greater than CEAT Ltd. and JK Tyres and
Ind. Which means Apollo have higher market shares.
The Sales turnover of CEAT Ltd. is much less than both its competitors, but the
P/E Ratio and Earnings Per Share is way more than both. That could benefit
CEAT for its value, generally, a high P/E Ratio means that investors are
anticipating higher growth in the future. A higher Earnings Per Share indicates
more value because investors will pay more for a firm with higher profits.
Return on Equity (ROE): The ROE for the company declined and down at 9.0%
during FY18, from 14.9% during FY18. The ROE measures the ability of a firm to
generate profits from its shareholders capital in the company.
Return on Assets (ROA): The ROA of the company declined and down at 6.4%
during FY18, from 9.0% during FY17. The ROA measures how efficiently the
company uses its assets to generate earnings.

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Ratio Analysis
Some important Ratio’s are:
Name Ratio Description
Current Ratio 1.02 Liquidity ratio that
measures a company's
ability to pay short-term
obligations.
Quick Ratio 0.53 Measures a company's
ability to meet its short-
term obligations with its
most liquid assets.
Dividend Yield (%) 1.32 A financial ratio that
shows how much a
company pays out in
dividends each year
relative to its share
price.
Interest Coverage Ratio 7.74 It is used to determine
how easily a company
can pay interest on
outstanding debt.
Debt Equity Ratio 0.52 A measure of a
company’s financial
leverage calculated by
dividing its total
liabilities by
stockholder’s equity.
Return on Assets (%) 4.82 An indicator of how
efficient management is
at using its assets to
generate earnings
Return on Equity (%) 9.11 It measures a
company’s profitability
by revealing how much
profit a company
generates with the
money shareholders
have invested,

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Financial Analysis
CEAT Ltd. has announced its results for the year ended March 2018. The
detailed performance review of the company during FY17-18;
Income Statement Analysis:
▪ Operating income during the year rose 8.1% on a year-on-year (YoY)
basis.
▪ The company's operating profit decreased by 6.4% YoY during the fiscal.
Operating profit margins witnessed a fall and stood at 9.9% in FY18 as
against 11.4% in FY17.
▪ Depreciation charges and finance costs increased by 17.8% YoY and
19.1% YoY, respectively.
▪ Other income grew by 58.1% YoY.
▪ Net profit for the year declined by 35.1% YoY.
▪ Net profit margins during the year declined from 6.2% in FY17 to 3.7% in
FY18.
No. of Months Year Ending 12 Mar-17* 12 Mar-18* % Change
Net Sales Rs m 57,665 62,308 8.1%
Other income Rs m 186 295 58.1%
Total Revenues Rs m 57,851 62,602 8.2%
Gross profit Rs m 6,568 6,148 -6.4%
Depreciation Rs m 1,431 1,686 17.8%
Interest Rs m 817 974 19.1%
Profit before tax Rs m 4,506 3,783 -16.1%
Tax Rs m 1,064 1,340 25.9%
Profit after tax Rs m 3,592 2,333 -35.1%
Gross profit margin % 11.4 9.9
Effective tax rate % 23.6 35.4
Net profit margin % 6.2 3.7

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Balance Sheet Analysis:
▪ The company's current liabilities during FY18 stood at Rs 18 billion as
compared to Rs 14 billion in FY17, thereby witnessing an increase of
30.7%.
▪ Long-term debt down at Rs 5 billion as compared to Rs 9 billion during
FY17, a fall of 47.1%.
▪ Current assets fell 1% and stood at Rs 18 billion, while fixed assets rose
9% and stood at Rs 30 billion in FY18.
▪ Overall, the total assets and liabilities for FY18 stood at Rs 52 billion as
against Rs 49 billion during FY17, thereby witnessing a growth of 5%.
No. of Months Year Ending 12 Mar-17* 12 Mar-18* % Change
Net worth Rs m 24,150 26,061 7.9
Current Liabilities Rs m 14,079 18,400 30.7
Long-term Debt Rs m 8,524 4,512 -47.1
Total Liabilities Rs m 49,169 51,610 5.0
Current assets Rs m 18,420 18,146 -1.5
Fixed Assets Rs m 27,788 30,338 9.2
Total Assets Rs m 49,169 51,610 5.0

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Cash Flow Statement Analysis:
▪ CEAT LTD.'s cash flow from operating activities (CFO) during FY18 stood
at Rs 7 billion, an improvement of 101.9% on a YoY basis.
▪ Cash flow from investing activities (CFI) during FY18 stood at Rs -4 billion
on a YoY basis.
▪ Cash flow from financial activities (CFF) during FY18 stood at Rs -2 billion
on a YoY basis.
▪ Overall, net cash flows for the company during FY18 stood at Rs 582
million from the Rs 104 million net cash flows seen during FY17.
Particulars
No. of
months
12 12
%
Change
Year Ending
Mar-
17
Mar-
18
Cash Flow from Operating
Activities
Rs m 3,347 6,757 101.9%
Cash Flow from Investing
Activities
Rs m -5,434 -4,151 -
Cash Flow from Financing
Activities
Rs m 2,191 -2,025 -
Net Cash Flow Rs m 104 582 462.0%

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Current Valuations:
▪ The trailing twelve-month earnings per share (EPS) of the company
stands at Rs 57.7, a decline from the EPS of Rs 88.8 recorded last year.
▪ The price to earnings (P/E) ratio, at the current price of Rs 1,415.8,
stands at 19.6 times its trailing twelve months earnings.
▪ The price to book value (P/BV) ratio at current price levels stands at 2.6
times, while the price to sales ratio stands at 1.1 times.
▪ The company's price to cash flow (P/CF) ratio stood at 15.1 times its end-
of-year operating cash flow earnings.
No. of Months Year Ending 12 Mar-17* 12 Mar-18*
Sales per share Rs 1,425.6 1,540.4
TTM Earnings per share Rs 88.8 57.7
Diluted earnings per share Rs 88.8 57.7
Price to Cash Flow x 12.1 15.1
TTM P/E ratio x 19.6 19.6
Price / Book Value ratio x 1.8 2.6
Market Cap Rs m 57,267 57,267
Dividends per share Rs 11.5 11.5
Share Price Performance: Over the last one year, CEAT LTD. share price has
moved from Rs 1,675.6 to Rs 1,415.8, registering a loss of Rs 259.8 or
around 15.5%.

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Recommendations
By reviewing all the terms, CEAT is a bit volatile, but as an Investor perspective
it is good for Long position. The float of stock is highly liquid and can be traded
at a limited point. The Credit Rating Agencies, India Ratings & Research has
Affirmed at ‘IND AA/Stable/IND A1+’ due to its diversified revenue base and
growth and comfortable liquidity.
Although the Company has delivered a poor growth of 4.53% over past five
years, the dividend pay-out has been low at 14.35% of profits over last three
years.
But the company, has recently announced to declared the dividend @ 120%
amounting to Rs. 12 per share (120%) as Final Dividend.
The Target Price for CEAT Ltd. could be Rs. 1500, making stop loss at 1250.
End of the Report