Dalal Street Investments

Apollo Tyres + Ceat – Result Analysis

May 21, 2008

Ceat Tyres: Ceat’s Q4FY2008 results are ahead of our expectations, mainly on the sales front. The net sales of the company grew by 14.8% to Rs646.2 crore in the quarter. The original equipment (OE) sales continued to decline whereas the replacement sales grew strongly by 28.2% in Q4FY2008.

The operating profit margin (OPM) declined by 180 basis points to 6.0% as a result of a higher raw material cost. Consequently, the operating profit declined by 12.3% to Rs38.5 crore.

For FY2008, the sales grew by 9.2% to Rs2,329 crore and the adjusted profit after tax (PAT) increased by 80.7% to Rs67.7 crore. Ceat sold a small part of its Bhandup plant and realised a value of Rs130 crore during the year. So, the reported PAT grew by 294% to Rs147.6 crore.

Apollo Tyres: Apollo Tyres’ (ATL) Q4FY08 results were in line with projections, though raw material prices increased more than expected. Net profit grew by 38.7% YoY to Rs 593m, aided by a 10% growth in revenue and a 140bps rise in the EBITDA margin. The company has announced major capacity programmes for the next three years involving an investment of Rs 11.5bn towards a greenfield project in Tamil Nadu and for increasing existing radial capacities for passenger car as well as truck & bus tyres at its Baroda plant.

Higher CAPEX and investment would impact the company’s cash flow in the medium term. EPS growth is expected to be flat for Fy2009.


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