Exceptional Q4 Results – Tata Motors and CEAT

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text css=”.vc_custom_1684479887819{margin-right: 16px !important;margin-left: 16px !important;border-right-width: 10px !important;border-left-width: 10px !important;}”]As we are halfway through the results season for Q4FY23, many companies from the Nifty 500 have declared their results. Every quarter throws up some stocks that deliver exceptional results, reviving investor confidence in stocks that have disappointed earlier or giving further impetus to stocks that are performing well every quarter.

This quarter saw Tata Motors and CEAT surprise with higher profits aided by growth in auto sales.

Tata Motors

Consolidated Q4FY23 Highlights:

• Revenues stood at Rs 1,07,509 crore, higher by 35.5% on a YoY basis
• EBITDA at Rs 13,114 crore, a YoY change of 58.3%
• PBT at Rs 5,000 crore, highest in the last twelve quarters
• Net auto debt reduction of Rs 13,800 crore

The company recorded its highest ever annual revenue in FY23 at Rs 3,50,600 crore and posted a net profit of Rs 2,414 crore after three consecutive years of posting losses. 

There are many factors that have contributed to this performance. By the end of FY23, the auto industry had overcome the issue of chip shortages due to which production speed increased. Sales of JLR in the international market have been improving in Q4. Tata Motors is able to maintain its leadership in the passenger EV segment with Nexon EV and has launched newer EV models also. Tata Motors also commands leadership in the HCV segment. All these make Tata Motors a strong player in the auto sector.

Post the Q4 results the stock rallied to touch a six-year high. With the current sales trends in EVs, HCVs and JLR continuing over next few quarters, FY24 will deliver better than expected returns to investors.

CEAT

Consolidated Q4FY23 Highlights:

• Revenue for Q4FY23 stood at Rs 2,875 crore, YoY growth of 10%
• EBITDA margin stood at 13.1%, an expansion of 458 bps vs Q3FY23
• Net profit stood at Rs 132 crore, a 4X growth over Q4FY23
  

 

Consolidated FY23 Highlights:

• Revenue for FY23 closed at Rs 11,315 crore, YoY growth of 21%
• EBITDA stood at Rs 982 crore, YoY growth of 37%
• Net Profit stood at Rs 182 crore, YoY growth of 161%

FY23 also marked the highest ever annual revenues for the company with revenues crossing Rs 10,000 crore. 

CEAT’s strong performance was due to higher orders for exports which jumped up significantly in Q4. Raw material costs reduced by about 8-9% over Q3, resulting in gross margin expansion by a robust 556 bps in Q4. Another reason is the strong auto sales in this quarter which automatically led to higher sales to OEMs. With the pandemic now completely behind us, the demand for replacement tyres has also shot up in the last few quarters as more and more vehicles are being used daily. 

CEAT has a balanced blend of vehicle segments which gives it a competitive advantage against peers. It is not heavily dependent on any segment but has largest contribution by Trucks and Buses (30%), Passenger Vehicles (18%), Two and Three wheelers (28%) and the rest by LCV and Off Highway (tractor) tyres.

Replacement markets make for 56% of total sales, OEMs at 24% and remainder 20% is derived from exports.

Post the results, the price of CEAT’s shares is almost at an all-time high. The stock price may reach new highs very soon and aim for higher highs in the upcoming months as a result of expanding auto sales, controlled raw material inflation, and increasing export orders.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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