Ceat's yearly turnover comprises 60% contribution from the replacement market, 27% from the OEM business and 13% from exports (Priyanka Parashar/Mint)
Ceat's yearly turnover comprises 60% contribution from the replacement market, 27% from the OEM business and 13% from exports (Priyanka Parashar/Mint)

Ceat expects strong growth in FY20 on truck radials, new PV orders

  • Ceat Tyres posted a revenue growth of 4.4% at 1,760 crore in the fourth quarter of 2018-19
  • The company is building production capacity to cater to the demand it has in its order books via capacity expansion plans, including a dedicated plant for passenger vehicle tyres in Chennai

Mumbai: Ceat Tyres, which posted Q4 FY19 revenue growth of 4.4% at 1,760 crore, is bullish on the growth prospects in FY20 on the back of expected pre-buying of BS IV vehicles in Q3 and Q4, penetration in the truck radial segment and new orders from the passenger vehicle (PV) OEMs.

“We are expecting a relatively higher growth in FY20 due to pre-buying of BS IV-compliant vehicles in the second half of FY20, further penetration in the truck radial tyre segment and new orders for car radials from PV manufacturers," Anant Goenka, managing director, Ceat Ltd, told Mint in a telephonic interview on 7 May.

Goenka said Ceat remains under-penetrated in the truck radial tyre segment.

He also foresees positive traction in the replacement market for tyres during the summer months of May and June. “Typically, we see higher sales in the replacement market during summers as tyres get worn out in hot weather conditions. Also, the two-wheeler riders replace their tyres before monsoons," he added.

The company is building sufficient production capacity to cater to the immediate demand it has in its order books via capacity expansion plans, including a dedicated plant for passenger vehicle tyres in Chennai.

“The upcoming plant in Chennai will be operational in H2 FY20," Goenka updated.

Ceat has earmarked a total investment of 2,000 crore for its Chennai plant, which, once fully operational in 2-3 years, will have a production capacity of 30,000 tyres per day at its peak. Goenka said the earmarked investments would be made in phases over the next 2-3 years.

The company is planning a capex of 1,300–1,500 crore in FY20, which, according to Goenka, includes capacity expansion across all plants.

“We are working on our capacity constraints. The capex for FY20 includes multiple capacity expansion programmes, including the two-wheeler plant in Nagpur, commercial vehicle radial tyre plant in Halol, PV plant in Chennai and the Ambernath facility, where we make off-highway tyres," he said.

With the upcoming unit in Chennai, Ceat will have six plants in India across Nashik, Bhandup, Halol, Ambernath and Nagpur. It also has a facility in Sri Lanka.

Notably, Ceat plans to raise the funds required for capital expenditure through internal accruals and debt. It’s debt to equity stands at 0.54.

Ceat’s FY19 revenues stand at 6,985 crore, up 11.2% year-on-year (YoY). The company’s EBIDTA grew at 3.9% to 663 crore. It’s profit after tax for FY19 stood at 251 crore.

The company’s yearly turnover comprises 60% contribution from the replacement market, 27% from the OEM business and 13% from exports. Within the OEM business, the two-wheeler and commercial vehicle tyres are the largest segments currently in terms of revenues.

On FY19 performance, Goenka said the market demand slowed down from November 2018 due to a mix of several factors, including insurance costs, NBFC crisis, new axle load norms for CVs, production cuts by vehicle manufacturers and others.

“We are hoping that demand will recover post general elections," he said.

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