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Ceat SENSEX

Fundamental Pick

Initial Coverage

CEAT LIMITED

9th August 2011

Ceat Ltd is a one of the leading manufacturer of tyre in India with a

market share of 12% of Indian Tyre Industry. Today Ceats portfolio

consist of various segment such as heavy duty trucks and buses

(T&B), light commercial vehicles (LCVs), passenger cars (PC), earth-

movers and forklifts (Specialty segment) and 2wheelers. Ceat is

manufacturing over 10 million tyres in a year. The Company derive

over 65% of its revenue from the replacement segment. With the

growth in Indian Automobile segment and companys focus towards

increasing the capacity to cater the demand of the tyre industry will

lead to healthy growth of the company. Looking at the Industry and

the companys strong growth prospects, we initiate coverage on

the stock with 'BUY' rating and a price target of 125.

INVESTMENT ARGUMENT:

Growth in OEM to fuel Revenue

Indian Automobile industry has witnessed strong recovery from the

recession. Automobile domestic sales has grown at a CAGR of 27%

over FY09-11. In FY11 Passenger Vehicle (PV) has grown by 29% fol-

lowed by Commercial Vehicle (CV) which grew by 27% and 2/3

wheelers by 26%. Increase in the Auto demand will directly lead to

demand for the tyres from OEM and the robust growth witnessedin last two year will lead to replacement demand. CV is contributing

>65% to the company's sales followed by PV 12% and 2/3Wheelers

10%.

Operating margin boosts up: with increased Focus on Replace-

ment business.

Replacement segment has better margin as compared to OEM. In

FY11 the replacement segment contributed 66% to the companys

revenues. Going forward the company plans to increase this to 70-

75%. We believe shift toward the higher margin business will over-all improve the operating margin of Ceat.

Currently the company has a sales network of 34 regional offices

and over 3500 dealers out of which 100 are exclusive CEAT shoppes

and 96 Ceat Hubs. Going forward the company plans to increase

the number of Shoppes from 100 to 200 by FY13E and Ceat Hubs to

260 from 96. On an average T&B tyres are replaced after a period

of 12-18 months and PC tyres are replaced in 24-48 month.

Key Share Data

NSE Symbol CEATLTD

BSE Code/Group 500878/B

Bloomberg Code CEATIN

Reuters Code CEAT.BO

Equity Capital (`Cr) 34.24

Face value ` 10

Market Cap. (`Cr) 300

52W H/L 195/84.25

Avg. Daily Volume 150790

Sector TYRES

Sensex 16990

Nifty 5119

Share Holding Pattern

Promoter 49.20%

FII 1.80%

DII 17.78%

Public & Others 31.22%

Stock Returns in (%)

1Mth 3Mth 6Mth

CEAT -17.82 -8.38 -4.55

BSE AUTO -9.36 -10.51 -1.20

Research Analyst

Dipti [email protected]# +91 79 26666717

Rating : Buy

Target Price :`125

Upside : 35%

Time Frame: 15-18 month

CMP :`91.3(as on 08/08/11)

Page : 1

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CEAT LIMITED

Expansion of Production Capacity

Ceat commissioned its Halol (Gujrat) Plant in FY11. The plant has an in-

stalled capacity to produce 150 tons per day (tpd). Further company is

planning to enhance its production capacity of Nasik plant by 35tpdfrom the current 165tpd to 200tpd. Apart from capacity expansion at

Halol And Nasik plant company has also expanded it capacity to 5.5 lakh

tyre per month from 2.5 lakh tyre per month at Ace tyres (Out Source

Partner)

Decline in Raw material price helps to increase the margins.

Over 70% of its total cost of production is raw material cost. In last fi-

nancial year we have witnessed all time high rubber prices and even

crude oil price showed a spurt. Although the price has corrected from

its peak; going forward we believe that there is space for further 10-15% correction in rubber prices. In FY11, despite the industry witness-

ing a hike of 63% in natural rubber prices; the company passed on the

hike to its end customer with a lag, due to which companys EBIDTA

margin was adversely affected. In FY11 and in Q1FY12 the company

hiked its product prices by 9-10% throughout all segments. We expect

the rubber prices to hover in the range of`150-200 over FY12E & FY13E

which will help company to record higher operating profits.

Healthy Financial and Valuation

We expect the revenue and profit of Ceat to grow at a CAGR of 22% and

116% to`5382 and`128 Crs respectively over FY11 to FY13E. At the

CMP of`91 the company is trading at multiples of 0.36X and 0.28X of

its FY2012E and FY2013E Book Value (BV) of`251.45 and`321.34 re-

spectively. We initiate coverage on CEAT with a BUY rating and a price

target of`125 in 15-18 month. Historically the company is trading be-

tween P/BV band of 0.4-0.8, we conservatively take the multiple of 0.5

with its FY2013E BV of`321.34.

Page : 2

FY09 FY10 FY11E FY12E FY13E

Revenew (` crs) 2366.50 2807.47 3468.93 4381.62 5148.83

YoY 2% 19% 24% 26% 18%

EBITDA (` crs) 9.02 280.55 93.50 198.10 247.67

EBITDA (%) 0% 10% 3% 5% 5%

PAT (`crs) -16.11 161.03 22.28 95.64 130.51

PAT (%) -1% 6% 1% 2% 3%

DEPS (`) -4.71 47.03 6.51 27.93 38.12

BV (`) 142.63 183.62 189.59 215.21 249.81

ROE (%) -3% 26% 3% 13% 15%

ROCE (%) -1% 19% 4% 9% 10%

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Ceat, 12%

MRF, 27%

Birla, 11%

JK, 16%

Apollo, 19%

Others, 15%

Source: Company, Monarch Research

Figure 1: Industry Scenario

CEAT LIMITED

About the Company

Page : 3

Ceat Ltd is a one of the leading manufacturer of tyre in India. It is a part

of RPG group. Company caters all segments of the automobile industry

and some of the Off The Road (OTR) products as well. Today Ceats

portfolio consist of various segment such as heavy duty T&B, LCVs, PC,

earthmovers and forklifts (Specialty segment) and 2wheelers.

The company was incorporated in 1958, in collaboration with TATA

Group as Ceat Tyres of India Ltd. In 1982 RPG Group took over the com-

pany and named as CEAT LIMITED.

Ceat is manufacturing over 10 million tyres in a year. In FY11 the com-

pany's market share was nearly 12% in the Indian Tyre Industry. Thecompany has improved its market share by 1% as compared to last

FY10. The Company derive over 65% of its revenue from the replace-

ment segment.

Company has 3 manufacturing facilities 2 in Maharashtra (Nasik and

Bhandup) and 1 in Gujarat (Halol). It has a strong sales network consist-

ing of 34 regional offices and over 3,500 dealers of which approxi-

mately 100 are exclusive dealers running the CEAT Shoppe outlets for

the PC segment and 96 run the CEAT Hubs for the T&B segments.

Ceat also has global Presence with 20% revenue comeing from the ex-port market. The company exports to nearly 112 countries across

Asia, Africa, Europe and America.

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CEAT LIMITED

Page : 4

Ceat has associated Joint Venture (JV) in Sri Lanka named as CEAT Ke-

lani. In FY10 the company increased its stake in this JV to 54.84% from

the initial level of 18% . As a result of this, CEATs investment arm -

Associated CEAT Holdings Company (Private) Limited (ACHL) has be-

come its subsidiary. ACHL controls 50% stake in the operating company.

Kelani has showed good growth in FY11 registering an increment of 29%

in its net sales. As Compared with Ceats standalone margin, the marginof Kelani is better, resulting to better margin in consolidated books.

Tyre Industry

Nearly 5% of the global demand and supply is contributed by the Indian

Tyre Industry. The industry has registered significant growth in FY10

with a turn over of`25,000 crs, resulting in the growth of 12-13% over

FY09. This growth is expected to be predominantly driven by an increase

in volumes rather than average realizations. Average realization for FY10

was ~`185 Per Kg. In FY10 total Tyre export was `3625 crs. In India

there are 36 tyre manufactures out of them top 10 players contribute~95% of the total production

The Indian tyre industry is enjoying strong growth and will continue to

do so on the back of the countrys fast paced GDP growth, growth in the

automobile industry, faster development of road infrastructure, increas-

ing levels of radialisation as well as growing demand from the OTR seg-

ment. Radialisation level in India is still very Low as compared to the

developed nations . India has matched the global radialisation in the PC

segment i.e of 98% as compared with the average global level of 95%.

But in the case of LCV and Heavy Commercial vehicle (HCV) the average

global level is of 60% where as India has reached only 18% in LCV and

12% in HCV. Going forward with the development in the India infrastruc-

ture this radialisation level will improve

Tyre industry is highly sensitive to its raw material. Nearly 72% of the

total cost of production is raw material cost.

Exhibit 1: Raw Material Cost

Raw Material % to Raw Material Cost

Natural Rubber 43%Nylon Tyre Cord 18%

Carbon Black 11%

Rubber Chemical 5%

Butyl Rubber 4%

Poly Butadiene Rubber (PBR) 5%

Styrene Butadiene Rubber (SBR) 5%

Others 9%

Source: ATMA, Monarch Research

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54% 55% 56%58% 58%

62%

46% 45% 44% 42% 42%38%

0%

10%

20%

30%

40%

50%

60%

70%

0

100

200

300

400

500

600

700

800

900

1000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

'000 Tonnes

Production Imports Tyre Cons. Non Tyre Cons.

CEAT LIMITED

Tyre Industry

Page : 5

Nearly 55-60% of the total rubber production in India is utilized

by the tyre segment. Tyre industry imports high amount of syn-

thetic rubber (PBR, SBR) mainly due to unavailability of the same.

Following is the trend of the Indias Rubber Production, Con

sumption and the Imports

There are also few drivers which generates the import demand

of the raw material

No domestic Production of Butyl Rubber and Styrene Butadi-

ene Rubber of tyre.

Production of Nylon Tyre Cord Fabric, Polybutadiene Rubber,

Rubber Chemicals, Steal Tyre Cord, Polyester Tyre Cord insuf-

ficient to meet domestic demand.

Duty-free imports permitted against export of tyres; domes-

tic demand not sufficient to meet complete requirement;

technical and commercial considerations

Business strategy to have multiple sources of supply.

Source: ATMA, Monarch Research

Figure 2: Rubber Production and Consumption

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CV

67%

2/3W

10%

Car/Jeep

12%

Others

11%

0

5

10

15

20

25

30

35

40

'00000Domestic PV sales

CEAT LIMITED

Investment Arguments

Page : 6

Growth in OEM to fuel domestic demand

Indian Automobile industry has witnessed strong recovery from the re-

cession. Automobile domestic sales has grown at a CAGR of 27% overFY09-11. In FY11 PV has grown by 29% followed by CV which grew by

27% and 2/3 wheelers by 26%. As per Society of Indian Automobile

Manufacturers (SIAM) estimation in FY12E CV sales are expected to in-

crease by 14-16% whereas PV by 10-12% . Over the next 3-4 years PV is

likely to grow at a CAGR of 6.3% from 2009-2014 according to Automo-

tive Component Manufacturers Association (ACMA). Indian automobile

industry is likely to grow at a CAGR of 14% over 2009-2020 as per Ernest

and Young (E&Y) estimates. The car manufacturing capacity is estimated

to increase to 5.7million units by 2015 from 1.48 million units in 2009.

Increase in the Auto demand will directly lead to demand for the tyres

from OEM and the robust growth witnessed in last two years will lead to

replacement demand in coming years. OEM is contributing nearly 14-

15% to the total top-line of Ceat and replacement nearly 66% from re-

placement market rest is from Export market.

CV is contributing >65% to the company's sales followed by PV 12% and

2/3Wheelers 10%. Governments focus towards the infrastructure im

provement and building roads across the country (i.e. construction of33000 km Roads) will lead to strong growth for CV.


Source: SIAM, Monarch Research

Figure 3: Domestic PV & CV Sales

Figure 4: Segmental revenue of Ceat

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CEAT LIMITED


Page : 7

Operating margin boosts up: with increase Focus on Replacement busi-

ness.

Ceat being an auto ancillary has limited bargaining power with OEM.

Replacement segment has better margin as compared to OEM. In FY11

the replacement segment contributed 66% to the companys revenues.

Going forward the company plans to increase this to 70-75%. We be-

lieve shift toward the higher margin business will overall improve the

operating margin of Ceat.

To increase the market share in the replacement market Ceat has exclu-

sive outlets for its end customer. Ceat has made outlets for PV know as

CEAT Shoppes and for T&B as CEAT Hub. Currently the company has

a sales network of 34 regional offices and over 3500 dealers out of

which 100 are exclusive CEAT shoppes and 96 Ceat Hubs. Going forward

the company plans to increase the number of Shoppes from 100 to 200

by FY13E and Ceat Hubs to 260 from 96. This would increase the com-

panys reach to the end customer resulting in the higher replacement

sales.

On an average T&B tyres are replaced after a period of 12-18 months

and PC tyres are replaced in 24-48 month. Strong sales of consumer ve-

hicle which was witnessed in 2009 will result to strong replacement de-

mand in this financial year.


Figure 5: Segmental revenue of Ceat

Company is increasing its sales

network, by increasing total

number of dealer and its exclu-

sive outlets know as Ceat

Shoppes and Ceat Hub will

lead to increase in the replace-

ment business of the company.

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160 175 200 200

230 240240 220

5

90 175120

140

170

205

0

100

200

300

400

500

600

700

800

900

FY10 FY11 FY12E FY13E

N asik Bandup Halol Out sour ce


Figure 6: Capacity Expansion Plan.

MT/Day

CEAT LIMITED


Page : 8

Expansion of Production Capacity

Ceat commissioned its Halol (Gujrat) Plant in FY11. The plant has an in-

stalled capacity to produce 150 tons per day (tpd). The plant was com-

missioned on 25th march 2011. By September 2011 the plants is ex-pected to run on full capacity. Further company is planning to enhance

its production capacity of Nasik plant by 35tpd from the current 165tpd

to 200tpd. Current capacity of the company is 560tpd after the comple-

tion of Nasik plant and full utilization of Halol plat by the end of FY12 the

companys production will be 700tpd. The current capacity at Bhandup

Plant is 240tpd. Apart from capacity expansion at Halol and Nasik, the

company has expanded its capacity to 5.5 lakh tyre per month from 2.5

lakh tyre per month at Ace tyres which is outsourcing partner of the

Company.

At Halol plant the Company is basically involved in the production of Ra-

dial tyre which will lead to company's strong footprints in the Radial tyre

segment . Radial tyres are more efficient as compared to cross ply tyre

in terms of fuel efficiency and longer life.

India lags far behind other major economies in terms of radialisation.

The radialisation level in Western Europe, North America, Central

Europe is around 100%, 96%, 95% respectively and the world average

radialisation is around 65%. Whereas Indian radialisation level is at9.1%. This proves there is vast potential for the Radial tyre segment in

India. In India PC has moved towards radialisation and approximately

98% of PC tyres are Radial tyre. In T&B segment still radialisation is not

that popular mainly because of the Poor Indian Infrastructure. Today

T&B segment has been radialized approximately to 12%. Govts focus

towards improvement of infrastructure will lead to Radialisation. Com-

panies across the sector is focusing on increasing radial capacity to util-

ize the potential of the structural shift.

Industry move towards radi-

calization will lead to high op-

portunity for the company.Companys Halol plant is in

volved in radial tyre. In T&B

segment India is way far from

the average global standard of

radialisation

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100

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200

250

300

1-Apr-10

1-May-10

1-Jun-10

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1-Dec-10

1-Jan-11

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1-Jun-11

1-Jul-11

RSS4 Prices Per kg RSS3 Bangkok Prices per kg

CEAT LIMITED


Page : 9

Decline in Raw material price helps to increase the margins.

Primary raw materials required for the production of tyres are Natural

Rubber, Nylon Tyre Cord fabric, Carbon black and Crude etc. Over 70%

of its total cost of production is raw material cost. In last financial year

we have witnessed all time high rubber prices and even crude oil price

showed a spurt. This spurt in the raw material cost has adversely af-

fected the margin of the company. Although the price has corrected

from its peak; going forward we believe that there is space for further

10-15% correction in rubber prices.

Ceat basically procures rubber from the domestic market; only for syn-

thetic rubber and some portion of natural rubber it is dependent upon

the imports. In FY11, despite the industry witnessing a hike of 63% in

natural rubber prices; the company passed on the hike to its end cus-

tomer with a lag, due to which companys EBIDTA margin was adversely

affected.

The rubber prices have cooled down from their peaks as can be ob-

served from the chart below. The spread between International rubber

prices and Domestic rubber prices is also narrowing. In FY11 and in

Q1FY12 the company hiked its product prices by 9-10% throughout all

segments. We expect the rubber prices to hover in the range of`150-

200 over FY12E & FY13E which will help company to record higher oper-

ating profits due to low material costs and higher realizations.

70%65%

57% 55%

64% 66%69% 70% 71%

77% 79%

0%

9%16% 15%

6% 5% 5% 5% 4% 1% -1%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

% of Sales EBIDTA Margins

Figure 7: Gap between Increase in Rubber price and Price hike Figure 8: Cost of RM as % of Sales & EBITDA Margin.

Figure 9: Indian and International Rubber Price


Source: Rubber Board

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CEAT LIMITED


Page : 10

Other Arguments:

Acquired the CEAT brand from Pirelli

Ceat is focusing on the expansion of its export segment. Till FY10 thecompany was able to sell its product in 9 south Asian countries under

the brand name of Ceat. But was unable to sale in Europe and Latin

America. For these countries company use to sell its product under the

brand name of Altura. In FY11 The company has acquired the brand

name CEAT from Pirelli in October 2010 for nearly 9 mn Euro (`55 Crs).

By this acquisition the company is able to sell its product across the

globe under the brand name of Ceat. This acquisition will allow the com-

pany to command premium In Europe and Latin America Market. By this

acquisition the company also gets a right to out source tyres from China

or Vietnam or any other developing countries under the brand name of

CEAT.

Relocation of Bhandup Plant

Ceat has a plan to relocate its Bhandup plant. For that company has al-

ready bought 50 acre land at Ambernath in Thane (Maharashtra). Cur-

rently Bhanudup plant is spread over 31 acres of the land. Relocation of

the plant is taken into consideration to improve the operating margins.

Some of the problem faced at Bhandup plant are 1) This facility comes

under Mumbai region so the goods produced there has to face Octroi

duty applicable in Mumbai which is higher as compared to Thane dis-

trict. 2) the facility at Bhandup is based on old technology which result

in lower efficiency (in terms of production and higher energy cost). By

the sale of Bhandup land company will be able to generate cash of

nearly`400-500crs which will be used in the development of Ambernath

facility Company has sold 7 acre of its Bhandup plant in FY2007 at

`130crs and the amount was utilized in funding the Halol Facility.

Company has a plan to complete this relocation process within two

year. For this new facility company will be more techno savvy that

would help the company to reduce the man power required and shift

toward automation. The Company has started offering Voluntary Retire-ment System (VRS) to the Employees.

Relocation of plant will lead toimprovement in operating

margins

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CEAT LIMITED


Page : 11

Healthy Financial growth

We expect the revenue and profit of Ceat Ltd to grow at a CAGR of 22%

and 116% CAGR to`5382 Crs and`128 Crs respectively over FY11 toFY13E. Growth in sales is mainly due to the growth of the OEMs and it is

assumed that in India there would be high growth in CV segment as per

SIAM guidance. Further, the company is also in the expansion mode and

the improving utilization level should result in higher operating margins.

Apart from growth in OEM, Replacement segment will also generate

strong revenue for the company with higher operating margin. None-

theless the penetration of the Brand name Ceat will help the company

to get strong export market with brand recognition.

The operating margin and net margins are expected to increase by191bps and 151bps respectively by FY13E. Operating and Net Profit are

expected to growth at a CAGR 57% and 116% over the period FY11 to

FY13E respectively resulting in operating and net profit of`280 Crs and

`128 Crs.

2,850

3,602

4,568

5,382


Sales

289 113 222 280

165

27

99

128


Operating Profit Net Profit

`in Crs

9.5%

2.9%

4.5%4.8%5.4%

0.7%

2.0% 2.2%


EBIDTA Margins PAT Margin

26

4

1315

20

4

911


ROE ROCE

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CEAT LIMITED

Valuation

Page : 12

Ceat Ltd is a one of the leading manufacturer of tyre in India with a mar-

ket share of 12% of India Tyre Industry. Today Ceats portfolio consist of

various segment such as heavy duty T&B, LCVs, PC, earthmovers and

forklifts (Specialty segment) and 2wheelers. Ceat is manufacturingyearly over 10 million tyres in a year and over 65% revenue comes from

the replacement business. With the growth in Indian Automobile seg-

ment and companys focus towards increasing the capacity to cater the

demand of the tyre industry will lead to healthy growth of the company.

We expect the revenue and profit of Ceat to grow at a CAGR of 22% and

116% to`5382 and`128 Crs respectively over FY11 to FY13E. At the

CMP of`91 the company is trading at multiples of 0.36X and 0.28X of

its FY2012E and FY2013E Book Value (BV) of`251.45 and`321.34 re-

spectively. We initiate coverage on CEAT with a BUY rating and a pricetarget of`125 in 15-18 month. Historically the company is trading be-

tween P/BV band of 0.4-0.8, we conservatively take the multiple of 0.5

with its FY2013E BV of`321.34.

-

100

200

300

400

500

600

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

PE Band

Avg. Price 1 3 5 7 9 11

-

50

100

150

200

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300

Apr-06

Aug-06

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P/BV Band

Avg. Pr ice 0.2 0.4 0.6 0.8 1.0 1.2

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500

1,000

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Apr-06

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Aug-11

EV/EBITDA Band

EV 2 4 6 8 10

48

8

29

37

56

19

40

50


EPS & CEPS

EPS CEPS

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CEAT LIMITED

Concerns

Page : 13

Raw material Cost

Prices of key Raw material (Natural Rubber and Crude Oil) are on rise.

Margins are getting pressurized due to continuous rise in rubber prices.Since Ceat was unable to pass the complete raise the company has suf-

fered high on margins. Going forward with the cool down in the rubber

price and increasing the realization level the company will improve the

operating margins

World Economy concerns

Slower than expected global recovery could impact future growth pros-

pects and our earnings forecast

Fluctuation in Currency

~ 21% of the companys revenue comes from its exports thus the com

pany is exposed to currency Risk. Any adverse movement in the cur-

rency can have a substantial impact on the companys revenue.

Increasing Competition

Ceat faces threat from China in radial tyre. To control this threat com-

panys plat at Halol is basically involve in manufacturing of Radial Tyres.

Delay in Relocation of Bhandup Plant.

Today Bhandup plant has highest production capacity out of all the

there facility. Ceat is planning to shift its Bhandup facility to Ambernath

to save Octroi Cost and to improve operational efficiencies resulting in

improvement of Operating Margins. The complete relocation will be

completed in two years and the process will be done in phases. Any de-

lay in shifting plant would result in negative impact on margins.

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CEAT LIMITED

Profit & Loss

Page :

Balance Sheet

RatiosCash Flow

.

YEAR 2011 2011 2012E 2013E

Net Sales 2,850.43 3,602.39 4,568.46 5,382.38

Growth (%) 26.38 26.82 17.82

xpenditure 2,561.92 3,488.94 4,346.47 5,102.24

% to Sales 89.88 96.85 95.14 94.80

BITDA 288.51 113.45 221.99 280.14

EBIDTA Margins (%) 10.12 3.15 4.86 5.20

Depreciation 27.49 35.94 38.69 43.38

EBIT 261.02 77.51 183.31 236.77

Other Income 41.07 52.13 66.07 77.82

nterest 57.28 79.96 96.43 124.58

PBT 244.81 49.68 152.94 190.01

Tax 79.63 14.42 50.59 61.71

PAT 165.18 27.44 99.19 128.30

Growth (%) (83.39) 261.48 29.35

AT Margins (%) 5.79 0.76 2.17 2.38

YEAR 2010 2011E 2012E 2013E

SOURCES OF FUNDS:

Share Capital 34.24 34.24 34.24 34

Reserves Total 594.96 613.20 704.38 820

Net Worth 629.20 653.49 744.67 860

Total Debt 673.63 1,050.51 1,187.29 1,310Minority Interest 10.41 - -

Total Liabilities 1,334.54 1,729.79 1,957.74 2,197

APP. OF FUNDS:

Goodwill 3.28 20.48 20.48 20

Gross Block 1,292.85 1,923.50 2,070.43 2,321

Less: Acc. Depri 495.26 530.30 568.99 612

Net Block 797.59 1,393.20 1,501.44 1,709

Capital WIP 234.01 127.23 250.00 200

Investments 43.42 42.96 42.96 42

Total Current Assets 1,058.34 1,256.32 1,450.50 1,726

Inventories 417.20 586.94 588.75 694

Sundry Debtors 390.33 489.78 660.99 778Cash and Bank 140.98 48.90 35.12 67

Loans and Advances 109.83 130.70 165.63 185

Less Total Curr. Liab. 802.10 1,110.40 1,307.64 1,501

Total Assets 1,334.54 1,729.79 1,957.74 2,197

EAR 2010 2011E 2012E 2013E

rom Operations

rofit Before Tax 244.81 41.86 149.78 190.01

epr. & Amort. 27.49 35.94 38.69 43.38

nterest paid 57.28 79.96 96.43 124.58Operating profit 299.84 152.34 284.90 357.97

nc/(Dec) in Working

apital (17.55) 10.44 (10.72) (49.53)

ax Paid (54.64) (19.09) (50.59) (61.71)

et cash generated 227.65 143.69 223.59 246.73

ash Flow from Invest-

ng Activity

urchase of Fixed Asset (270.87) (517.59) (269.70) (201.01)

et Cash used in in-

esting activity (263.97) (488.07) (269.70) (201.01)

hanges in capital

tructurenc. in Shares capital - 6.05 - -

nterest Paid (64.30) (79.96) (96.43) (124.58)

nc/(Dec) in Loans 30.05 333.73 136.78 123.46

ividend Paid 10.03 (27.03) (8.01) (12.02)

et Cash From Financ-

ng (24.22) 232.79 32.33 (13.14)

otal Inflows (60.54) (111.59) (13.78) 32.57

pening cash Balance 201.52 160.02 48.90 35.12

losing cash Balance 140.98 48.43 35.12 67.70

YEAR 2010 2011E 2012E 2013

Profitability(%)

Operating Margin 10.12 3.15 4.86 5

Net Margin 5.79 0.76 2.17 2

(ROCE) 19.56 4.48 9.36 10

Valuation Ratio

P/BV 0.50 0.48 0.42 0

P/CEPS 1.62 4.92 2.26 1

EV/EBITDA 2.93 11.58 6.59 5

Debt/Equity 1.07 1.61 1.59 1

Current Ratio 1.32 1.13 1.11 1

Du Pont

Tax Burden 0.67 0.55 0.65 0

Interest Burden 0.81 0.38 0.61 0

Operating Margin 0.11 0.04 0.05 0

Asset Turnover 2.14 2.08 2.33 2

Financial Leverage 2.12 2.65 2.63 2

ROE 26.25 4.20 13.32 14

Valuation

Earning per share 48.24 8.01 28.97 37

CEPS 56.27 18.51 40.27 50

BV 183.76 190.86 217.48 251

GROWTH RATIOS (%)

Net Sales - 26.38 26.82 17

EBITDA - (60.68) 95.67 26

PAT - (83.39) 261.48 29

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CEAT LIMITED

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side is between 10%-20% and the stock can be bought on dips.

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der 5%. Profits must be taken on every rise, if any position made.

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must sell the stock and exit from the counter as there is a possibility of a correction of more than 10%.

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