CEAT SHARES EXTEND FALL AFTER Q4 RESULTS, KOTAK EQUITIES CUTS TARGET PRICE CITING MARGIN PRESSURE AHEAD

Tyre maker Ceat Limited's share price slipped over 2 percent to Rs 2,485 in morning trade on May 6, extending Friday’s 3 percent loss. The company’s Q4 results earlier last week showed a fall in net profit, hit by high rubber prices.

Kotak Institutional Equities slashed target price on CEAT stock to Rs 1,850, saying that the company's margin could decline in the coming quarters. The price target implies a downside of 27.2 percent from the last close of Rs 2,544 on May 3. The brokerage has maintained a 'sell' on the counter.

Kotak analysts anticipate a downward trajectory in CEAT's margins in the upcoming quarters, primarily influenced by a sharp uptick in both domestic and international rubber prices.

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CEAT has recently implemented price increases, but competitor MRF has maintained prices. This move to raise prices could potentially negatively impact CEAT's market share, analysts at Kotak said in a recent note.

CEAT recorded a 23 percent decrease in its consolidated net profit to Rs 102 crore for the fourth quarter ending March 2024. This decline was attributed to higher rubber costs.

The company saw its revenue from operations increase to Rs 2,992 crore during the same period. The rise in rubber prices, a key raw material for tyre production, by approximately 10 percent in the Jan-March quarter, contributed to a 3.7 percent increase in quarterly expenses for CEAT.

However, the company managed to expand its EBITDA margin to 13.1 percent in Q4.

Arnab Banerjee, MD and CEO of CEAT, expressed positivity about the company's performance, noting a recovery in volumes in the replacement and international markets during the second half of the quarter. He also highlighted stable margins for the quarter.

At 9:55 am, CEAT shares were trading at Rs 2,500, down 2 percent from the previous close. CEAT shares have plunged six percent in the last month.

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2024-05-06T04:32:32Z dg43tfdfdgfd