CEAT 2019-20 Annual Report Analysis

Tue, 31 Mar

CEAT has announced its results for the year ended March 2020. Let us have a look at the detailed performance review of the company during FY19-20.

CEAT Income Statement Analysis

• Operating income during the year fell 2.9% on a year-on-year (YoY) basis.
• The company's operating profit increased by 15.6% YoY during the fiscal. Operating profit margins witnessed a fall and down at 10.2% in FY20 as against 8.6% in FY19.
• Depreciation charges increased by 43.5% and finance costs increased by 65.7% YoY, respectively.
• Other income declined by 43.7% YoY.
• Net profit for the year declined by 7.8% YoY.
• Net profit margins during the year declined from 3.3% in FY19 to 3.1% in FY20.

CEAT Income Statement 2019-20

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Net Sales	Rs m	69,845	67,788	-2.9%
Other income	Rs m	403	227	-43.7%
Total Revenues	Rs m	70,248	68,015	-3.2%
Gross profit	Rs m	6,013	6,948	15.6%
Depreciation	Rs m	1,927	2,765	43.5%
Interest	Rs m	929	1,539	65.7%
Profit before tax	Rs m	3,560	2,871	-19.4%
Tax	Rs m	1,251	742	-40.7%
Profit after tax	Rs m	2,309	2,128	-7.8%
Gross profit margin	%	8.6	10.2
Effective tax rate	%	35.1	25.9
Net profit margin	%	3.3	3.1

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CEAT Balance Sheet Analysis

• The company's current liabilities during FY20 stood at Rs 23 billion as compared to Rs 21 billion in FY19, thereby witnessing an increase of 8.1%.
• Long-term debt stood at Rs 16 billion as compared to Rs 12 billion during FY19, a growth of 34.2%.
• Current assets fell 9% and stood at Rs 18 billion, while fixed assets rose 25% and stood at Rs 55 billion in FY20.
• Overall, the total assets and liabilities for FY20 stood at Rs 74 billion as against Rs 64 billion during FY19, thereby witnessing a growth of 15%.

CEAT Balance Sheet as on March 2020

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Networth	Rs m	27,661	29,079	5.1
Current Liabilities	Rs m	21,296	23,014	8.1
Long-term Debt	Rs m	12,226	16,408	34.2
Total Liabilities	Rs m	64,043	73,523	14.8
Current assets	Rs m	20,007	18,293	-8.6
Fixed Assets	Rs m	44,037	55,230	25.4
Total Assets	Rs m	64,043	73,523	14.8

CEAT Cash Flow Statement Analysis

• CEAT's cash flow from operating activities (CFO) during FY20 stood at Rs 10 billion, an improvement of 70.3% on a YoY basis.
• Cash flow from investing activities (CFI) during FY20 stood at Rs -11 billion, an improvement of 1.4% on a YoY basis.
• Cash flow from financial activities (CFF) during FY20 stood at Rs 790 million on a YoY basis.
• Overall, net cash flows for the company during FY20 stood at Rs -402 million from the Rs -146 million net cash flows seen during FY19.

CEAT Cash Flow Statement 2019-20

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-19	Mar-20
Cash Flow from Operating Activities	Rs m	5,614	9,563	70.3%
Cash Flow from Investing Activities	Rs m	-10,605	-10,755	-
Cash Flow from Financing Activities	Rs m	4,844	790	-83.7%
Net Cash Flow	Rs m	-146	-402	-

Current Valuations for CEAT

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 52.6, an decline from the EPS of Rs 57.1 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 787.1, stands at 15.0 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 1.1 times, while the price to sales ratio stands at 0.5 times.
• The company's price to cash flow (P/CF) ratio stood at 7.2 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Sales per share (Unadj.)	Rs	1,726.7	1,675.9
TTM Earnings per share	Rs	57.1	52.6
Diluted earnings per share	Rs	57.1	52.6
Price to Cash Flow	x	10.7	7.2
TTM P/E ratio	x	19.7	15.0
Price / Book Value ratio	x	1.9	1.2
Market Cap	Rs m	53,592	35,465
Dividends per share (Unadj.)	Rs	12.0	12.0

Ratio Analysis for CEAT

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 0.8x during FY20, from 0.9x during FY19. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 2.9x during FY20, from 4.8x during FY19. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 7.3% during FY20, from 8.3% during FY20. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at 9.7% during FY20, from 11.3% during FY19. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 5.0% during FY20, from 5.1% during FY19. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Current ratio	x	0.9	0.8
Debtors’ Days	Days	369	363
Interest coverage	x	4.8	2.9
Debt to equity ratio	x	0.4	0.6
Return on assets	%	5.1	5.0
Return on equity	%	8.3	7.3
Return on capital employed	%	11.3	9.7

To see how CEAT has performed over the last 5 years, please visit here.

CEAT Share Price Performance

Over the last one year, CEAT share price has moved down from Rs 1,124.3 to Rs 787.1, registering a loss of Rs 337.2 or around 30.0%.

Overall, the S&P BSE SENSEX is down 24.2% over the year.

(To know more, check out historical annual results for CEAT and quarterly results for CEAT)

Read: Latest Annual Report Analysis of CEAT