CEAT Limited, a flagship company of the RPG Group, stands among India’s top tyre manufacturers. Founded in 1958, CEAT has grown into a global player, delivering a diverse range of tyres for various vehicles, including two-wheelers, passenger cars, commercial vehicles, and off-highway vehicles (OHVs). In FY24, the company produced 4.8 crore tyres, marking a milestone by launching India’s first range of EV tyres for two-wheelers, three-wheelers, and four-wheelers.
With an international footprint spanning over 110 countries and a network of 27+ OEM partnerships, CEAT serves diverse markets. Its growing D2C (direct-to-customer) presence complements its physical network of 900+ outlets, 5,500 dealers, and 59,000 sub-dealers. This infrastructure ensures market accessibility and customer reach across urban and rural areas.
Manufacturing Infrastructure and Product Portfolio
CEAT’s six manufacturing facilities across India produce a variety of tyres designed for specific market segments. These plants also cater to niche categories through collaborations with 17 outsourcing units:
- Halol Plant: Focuses on truck & bus radial (TBR) and passenger car radial (PCR) tyres.
- Nashik Plant: Produces truck & bus tyres, light truck tyres, agricultural tyres, and passenger car radial tyres.
- Nagpur Plant: Dedicated to scooter, bike, and three-wheeler tyres.
- Bhandup Plant: Manufactures truck, bus, and specialty tyres.
- Ambernath Plant: Develops specialty tyres for niche applications.
- Chennai Plant: Specializes in motorcycle radial and passenger vehicle tyres.
CEAT’s product portfolio spans several key categories:
- Truck & Bus Tyres: 31% of total revenue
- Two- and Three-Wheeler Tyres: 27% of total revenue
- Passenger Vehicle Tyres: 20% of total revenue
- Off-Highway Tyres (OHTs): 15% of total revenue
- Light Commercial Vehicle Tyres: 7% of total revenue
Strategic Focus on EV and Premium Tyres
CEAT has emerged as a leader in the fast-growing EV tyre segment. It holds over 30% market share in the two-wheeler EV OEM category and collaborates with top EV manufacturers in India, including Ola Electric and Ather Energy. CEAT’s focus on premiumization is evident, with the share of large-diameter tyres (above 16-17 inches) increasing across both OEM and replacement segments.
In FY24, CEAT introduced steel-belted radial tyres such as Sportrad and Crossrad, targeting the performance motorcycle segment. These products cater to entry-level sports bikes, adventure touring motorcycles, and high-performance motorcycles. CEAT’s innovations aim to meet the demand for superior handling, enhanced durability, and riding comfort.
Financial Performance in FY24
Revenue Performance
- Total Revenue: ₹11,944 crore
- Revenue Growth: 5.6% YoY
- Market-wise Contribution:
- Replacement Market: 53%
- OEM Sales: 28%
- Exports: 19%
The revenue growth was driven by increasing demand in the specialty tyre and passenger vehicle categories. CEAT experienced a recovery in the commercial vehicle segment, supported by infrastructure development projects and higher replacement demand.
Profitability Overview
- EBITDA: ₹1,652 crore (70% YoY growth)
- EBITDA Margin: 13.8%, expanding by 520 basis points (bps)
- PAT (Net Profit): ₹615 crore, driven by improved operational efficiency
The profitability improvement resulted from better raw material management, product premiumization, and increased operational scale. CEAT’s focus on premium tyres expanded gross margins, despite challenges from rising natural rubber prices and high freight costs.
Operational Efficiency and Cash Flow Management
Operational Metrics
- Capacity Utilization: 80% in FY24
- Asset Turnover Ratio: 1.22x
- Working Capital Cycle: Strong management enabled efficient operations and reduced cash flow constraints.
Cash Flow Management
- Operating Cash Flow: ₹1,719 crore, driven by improved profit margins and effective working capital management.
- Capital Expenditure (Capex): ₹900 crore, primarily funded through internal accruals. CEAT plans to invest ₹1,000 crore in FY25, with ₹750 crore allocated to growth capex in TBR and PCR segments.
Debt and Solvency
CEAT has focused on maintaining a healthy balance sheet by reducing debt through regular repayments.
- Total Debt: ₹1,629 crore (as of March 2024)
- Debt-to-Equity Ratio: 0.4x
- Long-Term Borrowings: ₹957 crore
- Short-Term Borrowings: ₹672 crore
The company’s strong cash position and improved profitability enable it to meet interest obligations comfortably. CEAT has strategically managed its borrowings through structured term loans and debentures.
Dividend and Shareholder Returns
- Dividend Payout: ₹30 per share in FY24, with a dividend payout ratio of 18.9%.
- PE Ratio: 18.66x (TTM).
The company’s stock has shown significant growth, reaching ₹3,263 in September 2024. Analysts expect the ₹2,100-₹2,300 price range to act as a support zone for long-term investors, with an upside target of ₹3,600-₹3,800 in the near future.
Sector Trends and Growth Prospects
The Indian tyre industry is projected to grow significantly, with revenues expected to reach $22 billion by FY32. This growth will be driven by rising vehicle demand, infrastructure development, and increased replacement demand. CEAT is strategically positioned to benefit from these trends, with a focus on high-margin premium tyres and international markets.
Collaborations and International Expansion
CEAT has deepened its collaboration with global OEMs and aims to increase international business contributions to 25% over the next two to three years. The company launched over 42 off-highway and 30 passenger vehicle tyre SKUs in global markets in Q1 FY25. CEAT’s presence in markets like the US, Germany, and Brazil aligns with its strategy to diversify revenue streams.
Management and Corporate Governance
- CEO: Arnab Banerjee, with over 30 years of experience across industries such as Marico, Berger Paints, and CEAT.
- Chairman: Harsh Vardhan Goenka, leading RPG Enterprises across sectors like infrastructure, IT, and manufacturing.
- Promoter Holding: 47.21%, with key investors like Mirae Asset Multi-Cap Fund and LIC of India holding significant public stakes.
Sustainability Initiatives and EPR Compliance
CEAT is committed to sustainability, adhering to Extended Producer Responsibility (EPR) norms. The company allocated ₹107 crore in FY24 for EPR compliance, covering waste tyre management. CEAT also introduced eco-friendly tyres made from sustainable materials, aligning with its green manufacturing goals.
Future Outlook and Strategic Initiatives
- Focus on EV Tyres: CEAT plans to increase market penetration in the EV segment across two-, three-, and four-wheeler categories.
- Capacity Expansion: With the Chennai plant expected to become fully operational by Q2 FY25, CEAT aims to increase production in the truck-bus radial (TBR) segment.
- Acquisition of TYRESNMORE: CEAT completed the acquisition of TYRESNMORE, transforming it into a wholly-owned subsidiary to enhance its D2C capabilities.
- International Expansion: The company aims to increase exports by launching innovative tyre models tailored for international markets, focusing on Europe and the Americas.
Conclusion
CEAT Limited has established itself as a leader in the tyre industry by delivering innovative products, expanding its global footprint, and focusing on premiumization. The company’s strategic investments in EV tyres, capacity expansion, and sustainability align with future industry trends. With a solid financial performance, robust operational efficiency, and healthy cash flow, CEAT is well-positioned to maintain its growth trajectory.
Its focus on international markets, collaborations with OEMs, and emphasis on product innovation will further strengthen its market position. CEAT’s balanced approach to growth, profitability, and sustainability ensures that it remains a top contender in the dynamic and evolving global tyre industry.
