CEAT surges by 4% as company announces tyre distribution deal with Pirelli

CEAT and Pirelli have entered into an exclusive partnership for distribution of Pirelli's global range of premium motorcycle tyres in the Indian markets. This sole partnership will leverage CEAT's vast distribution network which  is pan India. Riding on CEAT's ever-expanding network, Pirelli will offer its entire gamut of motorcycle tyres.

The Italian company is moving forward with this plan noting that the premium motorcycle market in India is growing in size and is expected to post over 16 per cent growth over the next five years.The tyres should go on sale in the first week of December at select CEAT dealerships.

The Indian motorcycle market is the biggest in the world and the premium motorcycle segment is growing strongly. Globally, CEAT is ranked 27th. The 6-billion-euro Pirelli, on the other hand, is the world's fifth largest tyre manufacturer. The distribution pact between both the companies will give CEAT, India's second largest tyre maker with 26 percent market share, a foot in the premium motorcycle tyre segment which has been witnessing a double digit growth. The Pirelli tyre range would complement their range of existing tyres.

The distribution pact would help CEAT to increase their revenue over the period of time plus it would also help them in getting first hand knowledge regarding the premium tyre market. The partnership agreement would also help CEAT in competing with its rivals where they have a stronger presence.CEAT posted a good set of numbers led by robust sales growth. The Company's revenue for the quarter  by declined marginally by 2 percent Y-O-Y from Rs 1437.77 crores to Rs 1409.42. Due to sluggish domestic auto sector growth the EBITDA grew 15 percent Y-O-Y from Rs 175.44 crores to Rs 202.18 crores. Even after a dip in sales volume the company posted a 210 basis points increase in the margins. Lowering of raw material prices augumented the profitablity of the company as it increased by 30 percent Y-O-Y from Rs 82.35 crores to Rs 107.4 crores.

The Company's stock surged 4 percent in early trade to hit an intra-day high of Rs 1088.20 on the issuance of this positive news development before closing at Rs 1067.45 up 1.75 percent. Over the past few months the stock has been correcting itself by almost 20 percent from its 52 week high. This new partnership for the company is likely to be a sentiment positive for the stock.

Recently the Indian tyre market has witnessed tie-ups with the global players. In June this year, French tyre maker Michelin, had entered into a manufacturing agreement with the TVS Group. With 250 million people in India expected to move from zero vehicles to motor cycles or scooters over a period of time, good growth is expected in the market.

CEAT is one of India’s leading tyre manufacturers with a capacity of over 800 tonnes per day with a strong presence in the global market. CEAT enjoys a major market share in the Truck, Light Truck and 2-wheeler segment.