CEAT Shares fell by 9 percent because the companys profit for the quarter went down by 96.4 percent. This happened even though CEAT had revenue growth. On Friday July 17 CEAT Shares went down to ₹3,473.05 on the BSE.
The company CEAT Ltd made a profit of just ₹4 crore in the first quarter. This is a drop from ₹112 crore in the same quarter last year. CEATs revenue from operations went up by 22.4 percent to ₹4,318 crore. This is because there is a lot of demand for CEATs products.
The company said that the profit went down because the cost of materials went up. This was made worse by problems in West Asia and a loss of ₹50 crore because of the Sri Lankan rupee going down. The companys EBITDA went down by 5.7 percent to ₹365 crore.
CFO Kumar Subbiah said that CEAT could not increase prices to cover the rising cost of raw materials. This caused the gross margin to go down by 5.8 percent. The cost of materials is expected to go up by another 6-7 percent in the next quarter.
Even though the company had a quarter the board of CEAT approved a plan to spend ₹1,205 crore to expand its plant in Nagpur. This will increase the production capacity of the plant by 53,000 tyres per day.
Over the year CEAT shares have gone down by around 8 percent. This is worse than the market. The stock has gone up to a high of ₹4,431.60 and down to a low of ₹3,006.50 on the BSE.
Aurelius Business View says that CEATs revenue growth shows that there is still demand for its products. However the drop in profit shows how vulnerable CEAT is to changes in the cost of materials and currency exchange rates. Investors should watch what the company says about the quarter closely to see if the profit margins will get better.
Disclaimer: This article is, for purposes only and does not constitute investment advice. Readers are advised to consult a certified advisor before making investment decisions.
