Shares of a multibagger stock in the tyre industry appreciated to the tune of 5 percent on Wednesday’s early trades after the company reported robust results for the first quarter of the financial year.
CEAT Ltd on July 25, 2023, reported a net profit of ₹ 144.61 crores for the first quarter of June (Q1FY24), indicating a massive increase of 1463.35 percent or fifteen-fold, as compared to ₹ 9.25 crores reported in the corresponding quarter of the previous year (Q1FY23). Its revenue climbed 4.14 percent to ₹ 2,935.17 crores in Q1FY24, as compared to ₹ 2,818.38 crores in Q1FY23.
“Replacement and International business are looking good with good product-market fit. Our product performance continues to get accepted as superior across key geographies,” said Arnab Banerjee, MD and CEO of CEAT.
The company’s net profit margin came in at 35.75 percent in the latest quarter, as compared to 2.29 percent in Q1FY23, indicating an increase of 33.46 percent. On a sequential basis, its net profit margin increased by 2.70 percent from 33.46 percent reported in the March quarter of the previous financial year (Q4FY23).
“Our continuous focus on cash has helped us reduce our debt for the second consecutive quarter, and we have seen a reduction in our standalone gross debt by ₹ 97 crore,” he said.
CEAT is the flagship company of RPG Enterprises and one of India’s leading tyre manufacturers with a strong presence in Global markets as well. The company produces more than 41 million high-performance tyres, catering to various segments like 2-3 wheelers, passenger and utility vehicles, commercial vehicles and off-highway vehicles.
With a market capitalization of ₹ 10,018 crores, CEAT is a small-cap company. It has a low return on equity of 5.55 percent but an ideal debt-to-equity ratio of 0.67. Its shares were trading at a price-to-earnings ratio (P/E) of 31.15, which is lower than the industry P/E of 43.03, indicating that the stock might be undervalued as compared to its peers. At 12:57 PM, its shares were trading at ₹ 2553.80 apiece.
The company’s promoters hold a 47.21 percent stake in it, followed by foreign institutions with 26.19 percent, retail investors with 14.52 percent, mutual funds with 9.84 percent and other domestic institutions with 2.24 percent.
Written by Simran Bafna
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