India’s CEAT beats profit view on higher margins from price hikes

BENGALURU (Reuters) – Indian tyre maker CEAT reported a bigger-than-expected rise in third-quarter profit on higher margins, as price hikes made up for a rise in raw material costs and a slow recovery in sales growth.

CEAT’s consolidated net profit rose more than five times to 1.81 billion rupees (nearly $22 million) for the quarter ended Dec. 31. Analysts, on average, expected a profit of 1.24 billion rupees, per LSEG data.

The company hiked prices of its tyres for a second straight quarter. This helped it push its profit margins up to 6.1% from 1.3% a year ago, even as prices of raw materials rose this quarter.

Rubber prices, the key ingredient in tyre-making, ended higher in the quarter, responding to the rise in crude oil prices. Total expenses rose 2.5%, with raw material costs shooting up nearly 3%.

“It would be tough for the industry to hike prices easily going ahead due to major raw material basket inflation and thus result in margin mean reversion,” said ICICI Securities in a note in late December.

Revenue for the tyre-maker, which counts the likes of Maruti Suzuki and Mahindra and Mahindra as its clients, rose nearly 9% to 29.63 billion rupees, ahead of a 6% rise expected by analysts.

This is the second quarter of higher revenue growth for CEAT, following six straight quarters of slowing growth since July-September 2022, when it recorded a bumper growth of 47.8%.

Mumbai-based company is the first to report results among major tyre makers.

Rivals Apollo Tyres and JK Tyre will report results next week, while MRF, the country’s costliest stock, will release its quarterly numbers next month.

CEAT shares closed 4.4% higher before reporting results. They rose about 14% in the December quarter.

($1 = 83.0910 Indian rupees)

(Reporting by Nandan Mandayam and Kashish Tandon in Bengaluru)