Earnings Impact: CEAT shares plunge over 7% on 46.5% decline in Q3 profit | Stock Market News
Source: Live Mint
Shares of tyre manufacturer CEAT fell over 7 percent on Thursday, January 16, after the company reported a 46.5 percent year-on-year (YoY) decline in net profit to ₹97.1 crore for the third quarter ended December 31, 2024. The company attributed the decline to high raw material costs. In the same period last year, CEAT had posted a net profit of ₹181.5 crore, as per its regulatory filing.
Revenue from operations, however, grew by 11.4 percent to ₹3,299.9 crore, compared to ₹2,963.1 crore in Q3 FY24. Despite the increase in revenue, operating performance took a hit, with EBITDA declining 18.3 percent YoY to ₹340.9 crore from ₹417.5 crore. The EBITDA margin narrowed significantly to 10.3 percent in the quarter, down from 14.1 percent a year ago.
Total expenses rose to ₹3,175.58 crore, compared to ₹2,738.53 crore in the same quarter last year. The cost of materials consumed increased sharply to ₹2,116.52 crore from ₹1,694.91 crore in Q3 FY24, the company reported.
Management Commentary
Arnab Banerjee, Managing Director and CEO, stated that the company achieved robust double-digit growth in the replacement segment. While rising raw material costs pressured margins, the impact was partially offset by price hikes in select categories. Banerjee expressed optimism about stable demand and a strong order pipeline, adding that raw material costs are expected to remain flat in the fourth quarter, which should support growth momentum.
Kumar Subbiah, Chief Financial Officer, highlighted the strain on gross margins caused by increased raw material costs but noted that cost controls and pricing adjustments helped mitigate the pressure. He also revealed that CEAT incurred ₹283 crore in capital expenditure during the quarter, which was fully funded internally, ensuring debt levels remained steady.
Capacity Expansion Plans
CEAT announced plans to invest ₹400 crore to expand capacity at its Butibori plant in Nagpur, Maharashtra. Operating at 90 percent utilization, the plant currently produces 270 lakh tyres annually. The planned expansion, aimed at boosting capacity by 30 percent, is expected to be completed by FY2027-28. This investment will be financed through a mix of debt and internal accruals.
The expansion aligns with CEAT’s strategy to meet the anticipated increase in demand for two- and three-wheeler tyres in India.
Stock Price Movement
CEAT’s stock fell as much as 7.1 percent to an intraday low of ₹2,840. The stock is currently 21 percent below its peak of ₹3,581.45, reached in December 2024. However, the tyre stock has gained over 28 percent from its 52-week low of ₹2,211.00, recorded in May 2024.
Over the last year, CEAT shares have added more than 22 percent. However, the stock has lost over 10 percent in January 2025, following two consecutive months of gains.
