BLOG
Domestic Tyre Space: Gross margin decline on expected lines, commentary awaited amid course correction in rubber prices
Tyre major CEAT reported muted performance in Q2FY25. Standalone net sales for Q2FY25 came in at ₹ 3,298 crore (up 8.4% YoY and 4.1% QoQ).
Gross Margins for the quarter declined by 190 bps to 37.5% owing to high raw material cost (primarily natural rubber).
EBITDA for the quarter stood at ₹ 366 crore with EBITDA margins at 11.1% down ~90 bps QoQ. PAT for the quarter stood at ₹ 136.5 crore.
Industry players had already guided for muted Q2FY25 margin profile amidst unprecedented rise in rubber prices and calibrated price hikes.
With rubber prices down considerably from their recent highs (~₹ 245-247/kg in August 2024) and currently quoting at ₹ 196/kg, management commentary on margins bottoming out in Q3FY25 will be the key monitorable for the domestic tyre space.
Company’s topline growth was encouraging with healthy growth witnessed across OEM, replacement as well as export markets.
Our top bets in this space are JK Tyre (Rating: BUY; Target Price: ₹ 525) and Apollo Tyre (Rating: BUY; Target Price: ₹ 635)
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
Related content
Blogs
Articles - Stocks
Advantages and Disadvantages of NPS
It is a long established fact that a reader will be distracted by the readable content of a page when looking at it...
Articles - Stocks
Advantages and Disadvantages of NPS
It is a long established fact that a reader will be distracted by the readable content of a page when looking at it...
Articles - Stocks
Advantages and Disadvantages of NPS
It is a long established fact that a reader will be distracted by the readable content of a page when looking at it...
Video
Video - Stocks
What is Book Value?
Book Value Explained – Find out what is book value in stocks in this video by ICICIdirect.com.
Video - Stocks
What is Book Value?
Book Value Explained – Find out what is book value in stocks in this video by ICICIdirect.com.
Video - Stocks
What is Book Value?
Book Value Explained – Find out what is book value in stocks in this video by ICICIdirect.com.