CEAT LTD 2017-18 Annual Report Analysis

Sat, 31 Mar

CEAT has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

CEAT Income Statement Analysis

• Operating income during the year rose 20.1% on a year-on-year (YoY) basis.
• The company's operating profit decreased by 12.1% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 9.4% in FY18 as against 12.8% in FY17.
• Depreciation charges increased by 17.8% and finance costs increased by 15.7% YoY, respectively.
• Other income grew by 133.8% YoY.
• Net profit for the year declined by 36.4% YoY.
• Net profit margins during the year declined from 6.5% in FY17 to 3.4% in FY18.

CEAT Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	50,917	61,145	20.1%
Other income	Rs m	190	444	133.8%
Total Revenues	Rs m	51,107	61,589	20.5%
Gross profit	Rs m	6,509	5,721	-12.1%
Depreciation	Rs m	1,431	1,686	17.8%
Interest	Rs m	896	1,036	15.7%
Profit before tax	Rs m	4,373	3,443	-21.3%
Tax	Rs m	1,064	1,340	25.9%
Profit after tax	Rs m	3,309	2,103	-36.4%
Gross profit margin	%	12.8	9.4
Effective tax rate	%	24.3	38.9
Net profit margin	%	6.5	3.4

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CEAT Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 18 billion as compared to Rs 14 billion in FY17, thereby witnessing an increase of 30.6%.
• Long-term debt down at Rs 5 billion as compared to Rs 9 billion during FY17, a fall of 47.1%.
• Current assets fell 1% and stood at Rs 18 billion, while fixed assets rose 8% and stood at Rs 33 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 51 billion as against Rs 49 billion during FY17, thereby witnessing a growth of 5%.

CEAT Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	24,150	26,061	7.9
Current Liabilities	Rs m	14,079	18,389	30.6
Long-term Debt	Rs m	8,524	4,512	-47.1
Total Liabilities	Rs m	49,169	51,464	4.7
Current assets	Rs m	18,420	18,146	-1.5
Fixed Assets	Rs m	30,750	33,318	8.4
Total Assets	Rs m	49,169	51,464	4.7

CEAT Cash Flow Statement Analysis

• CEAT's cash flow from operating activities (CFO) during FY18 stood at Rs 7 billion, an improvement of 100.9% on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs -4 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs -2 billion on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs 582 million from the Rs 104 million net cash flows seen during FY17.

CEAT Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	3,347	6,724	100.9%
Cash Flow from Investing Activities	Rs m	-5,434	-4,118	-
Cash Flow from Financing Activities	Rs m	2,191	-2,025	-
Net Cash Flow	Rs m	104	582	462.0%

Current Valuations for CEAT

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 52.0, an decline from the EPS of Rs 81.8 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,501.8, stands at 27.2 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 2.3 times, while the price to sales ratio stands at 1.0 times.
• The company's price to cash flow (P/CF) ratio stood at 17.9 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	1,258.8	1,511.6
TTM Earnings per share	Rs	81.8	52.0
Diluted earnings per share	Rs	81.8	52.0
Price to Cash Flow	x	11.3	17.9
TTM P/E ratio	x	14.8	27.2
Price / Book Value ratio	x	1.8	2.6
Market Cap	Rs m	43,549	67,837
Dividends per share (Unadj.)	Rs	11.5	11.5

Ratio Analysis for CEAT

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.0x during FY18, from 1.3x during FY17. 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 4.3x during FY18, from 5.9x during FY17. 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 8.1% during FY18, from 13.7% during FY18. 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 14.7% during FY18, from 16.1% during FY17. 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 6.1% during FY18, from 8.6% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	1.3	1.0
Debtors’ Days	Days	440	446
Interest coverage	x	5.9	4.3
Debt to equity ratio	x	0.4	0.2
Return on assets	%	8.6	6.1
Return on equity	%	13.7	8.1
Return on capital employed	%	16.1	14.7

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 up from Rs 1,324.2 to Rs 1,501.8, registering a gain of Rs 177.6 or around 13.4%.

Overall, the S&P BSE SENSEX is up 12.1% 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