Cautiously Optimistic On Demand, Margin Recovery: ICICI Direct

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Domestically, Ceat Ltd. is witnessing healthy demand traction on the original equipment manufacturers front with replacement demand being steady in nature.

Robust demand is particularly being witnessed in the passenger vehicle space with chip supply issue easing while steady month-on-month improvement is seen in the commercial vehicle space.

On the exports front, demand in Europe and Indonesia is muted amid negative economic scenario. Sri Lanka, on the other hand, is witnessing 50-60% decline in volumes with Ceat earning steady margins (unchanged).

On the margins front, the company expects Q2 FY23 to be similar to Q1 FY23 with recovery seen from Q3 FY22 onwards. Overall, Ceat aims to achieve ~10-12% operating margins over the medium term. Replacement market business remains more lucrative in terms of margin than the OEM.

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