CEAT, a flagship company of the RPG Group, is one of India’s leading tyre manufacturers. It produces a wide range of tyres for two-wheelers, cars, trucks, buses, and even special categories like agricultural and industrial vehicles. With a robust presence in both domestic and international markets, CEAT manufactures over 4.8 crore tyres annually, offering more than 1,900 stock-keeping units (SKUs). In FY24, the company launched India’s first range of electric vehicle (EV) tyres, catering to two, three, and four-wheelers. CEAT exports its products to over 110 countries and collaborates with more than 27 original equipment manufacturers (OEMs). The company’s global operations and strong product portfolio give it a competitive edge in the tyre industry.
Manufacturing and Distribution
CEAT operates six manufacturing plants in India, each specializing in specific tyre categories:
- Halol Plant: Focuses on passenger car radial tyres and truck & bus radial tyres.
- Nashik Plant: Produces truck & bus tyres, farm tyres, and light truck tyres.
- Nagpur Plant: Specializes in scooter, bike, and three-wheeler tyres.
- Bhandup Plant: Focuses on truck & bus tyres, farm tyres, and specialty tyres.
- Ambernath Plant: Dedicated to specialty tyres.
- Chennai Plant: Specializes in passenger car and motorcycle radial tyres.
In addition to these in-house plants, CEAT collaborates with 17 outsourcing units to manufacture tyres, tubes, and flaps. CEAT has a strong distribution network, with 900+ outlets, 5,500 dealers, and 59,000 sub-dealers across India. This extensive network ensures its products are accessible to a wide customer base.
Market Position and Product Segments
CEAT holds a commanding position in India’s two-wheeler tyre replacement market with a 33% market share. In the passenger car and utility vehicle segment, the company holds a 16% market share. CEAT has been especially successful in the growing EV market, where it commands over 30% market share in the two-wheeler EV segment. The company also exports tyres, focusing on high-growth markets like Europe, Latin America, and the U.S.
Financial Performance
In FY24, CEAT reported net sales of ₹11,944 crore, a 5.6% year-on-year growth. This growth was driven by strong demand in the OEM and specialty tyre segments. The company saw a recovery in exports and the replacement market, especially in the commercial vehicle category. CEAT’s focus on tyres larger than 16-17 inches in the passenger vehicle segment is expected to drive future growth. In Q1 FY25, CEAT recorded net sales of ₹3,193 crore, a 9% year-on-year increase. This growth was fueled by strong replacement and export sales, although OEM sales were muted during the period.
Profitability
CEAT’s profitability has seen significant growth in recent years. The company’s EBITDA grew by 70% year-on-year in FY24, reaching ₹1,652 crore. This growth was largely due to the softening of raw material prices. However, natural rubber prices began rising in early 2024 due to global supply shortages, affecting the company’s raw material costs. CEAT’s net profit for FY24 stood at ₹615 crore, driven primarily by higher operating profits. In Q1 FY25, the company’s net profit was ₹149 crore, a modest 2% year-on-year increase.
Challenges and Opportunities
While CEAT has experienced strong growth, it faces challenges related to rising raw material costs, particularly natural rubber. Freight costs and advertising expenses also increased in Q1 FY25, impacting the company’s margins. Despite these challenges, CEAT has taken steps to mitigate the impact by raising prices in both domestic and international markets.
The company is also benefiting from a shift towards premiumization, where more customers are opting for higher-end products. In FY24, the contribution of premium products like larger passenger car tyres grew significantly. The company raised prices by 2-3% across various segments, which is expected to improve profitability going forward.
Efficiency and Cash Flow
CEAT’s cash flow from operations increased to ₹1,719 crore in FY24, supported by higher profits and effective working capital management. The company has a strong focus on maintaining operational efficiency. It also increased its investments in expanding its manufacturing capacity, spending ₹900 crore on capital expenditures in FY24. CEAT plans to invest around ₹1,000 crore in FY25, focusing on growth areas like truck & bus radial (TBR) and passenger car radial (PCR) tyres.
Solvency and Valuation
In FY24, CEAT’s total debt stood at ₹1,629 crore, with a debt-to-equity ratio of 0.4x. The company repaid a significant portion of its long-term borrowings, improving its financial health. CEAT’s interest coverage ratio remains strong, ensuring that the company has sufficient profits to meet its debt obligations. The company is trading at a price-to-earnings (PE) ratio of 18.66x, positioning it favorably compared to its competitors. CEAT’s dividend payout in FY24 was ₹30 per share, reflecting a dividend yield of 18.9%.
Market and Sector Potential
The Indian tyre industry is expected to experience strong growth in the coming years, with revenues projected to double from $9.5 billion in FY23 to $22 billion by FY32. Rising vehicle demand, government investments in infrastructure, and an expanding vehicle population will fuel this growth. CEAT is well-positioned to take advantage of these trends, particularly in the growing EV market. The company’s exports are also expected to increase, particularly in key markets like the U.S., Germany, Brazil, and the Middle East.
Competitive Landscape
CEAT faces competition from several key players in the tyre industry, but its strong market share in the two-wheeler and EV segments gives it a competitive edge. The company is also expanding its presence in the premium SUV and passenger car markets, where it is collaborating with major OEMs. CEAT supplies tyres for premium vehicles like BMW, Audi, and Mercedes in the replacement market, further solidifying its position as a leader in the tyre industry.
Future Outlook
CEAT’s future looks promising as it continues to expand its product portfolio and global presence. The company is focused on increasing its market share in the premium tyre segment, particularly in larger tyres for SUVs and trucks. CEAT is also investing in R&D to develop new, high-performance tyres for electric and autonomous vehicles, positioning itself for future growth in these emerging sectors. With its focus on expanding international sales and improving operational efficiency, CEAT is well-positioned to maintain its leadership in the global tyre market.
In conclusion, CEAT’s strong market presence, innovative product range, and focus on premiumization make it a company poised for continued growth. While challenges such as rising raw material costs remain, CEAT’s strategic initiatives and operational efficiency ensure it remains a key player in the Indian and global tyre industries.
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