Ceat Tyres Spark Capital Dec2017

DOMESTIC TYRE INDUSTRY
December 18, 2017
▪ MUKESH SARAF , mukesh@sparkcapital.in, +91 44 4344 0041

▪ RAMAKRISHNAN SESHAN, rseshan@sparkcapital.in , +91 44 4344 0020
Page 1
INDIAN AUTOMOTIVE INDUSTRY
DOMESTIC TYRE INDUSTRY
We continue to posit a favourable prognosis of the domestic tyre demand growth – across the Truck and Bus (T&B) tyre, Passenger Car radial
tyre segment (PCR) and the 2W/3W tyre segments – through FY20E. In preparation for the imminent growth in volumes through FY20E and COMPANY INITIATION/
beyond, domestic tyre companies have announced/ or are concluding capex spends over the near term. The gross block index (domestic SECTOR UPDATE
capacities) of the tyre manufacturers (indexed to 2008) increased from ~235 in FY14 to ~310 in FY17. Through FY17-FY20E, expect this index to 18 December 2017
increase by another ~150 points led majorly by 1) Apollo Tyres (greenfield plant at AP (TBR/PCR) and conclusion of capex at Chennai) 2) CEAT
Tyres (greenfield/brownfield capex for TBR, PCR and 2W) and 3) MRF Tyres (greenfield capex at Gujarat). Consequently, average RoCEs of
domestic players is expected to decline from an average of ~16-17% during FY14-FY17 to ~13-14% during FY17-FY20E. 30%
While the improvement in accruals (consequent to the underlying volume growth) would inhibit any adverse impact of the capex on the 25%
players’ balance sheet, we believe that prices of synthetic rubber would be a critical monitorable (production deficits witnessed globally in last 20%
5 quarters through 1QFY18) which could in turn have an impact on natural rubber prices (thereby impacting margins) 15%
We believe that MRF with its market leadership across most segments, and its staggered capex programme over the near term, would continue 10%
to exhibit superior RoCEs amongst the domestic players through FY20E. MRF, with its dominant position in the relatively more profitable 2W and 5%
PCR segments, would also be able to continue to generate stronger cash flows, thereby continuing to enjoy a strong balance sheet.
0%
We believe that Apollo Tyres, with the opportune commissioning of its TBR capacities by 1HFY19 (incremental capacities of 1.3mn tyres p.a. to -5%
come on-stream by Sep 19) would be best poised to capitalise on the strong TBR demand. While JK Tyres has significant underutilised capacities
Sep-17
Jun-17
Mar-17
Dec-16
Dec-17
at Cavendish, timely ramp up of the same would be a key monitorable.
CEAT is setting up capacities aggressively in the PCR space, (4.4 mn tyres p.a. expected to come-on-stream through FY20E), while Apollo is BSE Auto Sensex
expected to enhance capacities by ~3.5mn tyres p.a. during the period. In 2W, with all major players expected to enhance capacities through
FY20E (including CEAT by ~10mn tyres p.a.) expect the space to continue to be intensely competitive.
Stock performance (%)
We believe that revenue growth across segments would outstrip the volume growth, led by higher realisations on the back of increase in the
proportion of higher tonnage CVs, premium 2W and UVs/premium hatchbacks/sedans in the sales mix. 1m 3m 12m
Apollo (market leader in the T&B replacement market) has the widest product range in T&B tyres with 161 sizes across 47 categories, with CEAT a Sensex -7% -6% -2%
distant second at 60 sizes across 29 categories. In the 2W space, MRF (market leader) towers over competition, with 140 sizes across 47
categories, followed by CEAT with 107 sizes across 28 categories. In PCR, amongst domestic players, MRF again offers the widest product offering BSEAUTO -6% -7% 4%
with 216 sizes across 40 categories, followed by Apollo at 152 sizes across 16 categories.
Its expansive product range enables MRF have the highest proportion of exclusive dealerships (compared to peers), which contributes a
significant portion of its revenue.
We initiate coverage on CEAT Tyres (TP of Rs. 1,950, basis 16 Sep 19E EPS) with an ADD rating. CEAT’s strategic initiative to focus on the non- RESEARCH ANALYSTS
truck segment (importantly PCR and 2W) has demonstratedly borne fruit. Its gross margin has improved to ~41% in FY17 from ~25% in FY12,
MUKESH SARAF
correspondingly, the contribution of the non T&B segments has improved to ~32% in FY17 from ~16% in FY12. With recent and upcoming
mukesh@sparkcapital.in
capacity additions in these segments, CEAT is poised to expand its market share in these segments. CEAT has embarked upon an ambitious
+91 44 4344 0041
capacity expansion programme involving an outlay of Rs. 28bn through FY22, whereby it is expected to enhance its capacities in the PCR, TBR and
2W spaces. Expect the capex to have a depressant impact on the RoCEs; however we do not foresee any meaningful impact on the leverage RAMAKRISHNAN SESHAN
ratios of the company on the back of significant cash accruals over this period. rseshan@sparkcapital.in
+91 44 43442 0020
Maintain our BUY rating on Apollo Tyres, with TP of Rs. 300, basis 12x Sep19E EPS.
find SPARK RESEARCH on Page 2
(SPAK <go>)
PLAYER-WISE MARKET SHARE AND REVENUE CONTRIBUTION
MRF enjoys the most rounded portfolio amongst peers, spread across the Truck & Bus (T&B), PCR (Passenger
Car Radial) and 2W (Two-wheeler) tyre segments
Apollo Tyres garners a relatively higher share of its revenue from the ‘more profitable’ replacement market due
to 1) higher share of T&B in its domestic revenue mix and 2) the fact that its European operations (currently)
cater only to the replacement PCR segment
Page 3
Segmental contribution to revenue
MRF enjoys the most rounded portfolio amongst its peers, spread across the T&B, PCR and 2W segments
MRF : Segmental contribution to revenue – FY17 CEAT : Segmental contribution to revenue – FY17
Others Others
Farm and OTR 5.0% Farm and OTR 5.0%
8.0% 7.0%
T&B
2W
T&B 33.0%
10.0%
45.0%
2W
29.0%
LCV
13.0%
PCR
LCV 13.0%
PCR
19.0% 13.0%
Source Industry, Spark Capital Source Company, Spark Capital
Apollo (Consol) : Segmental contribution to revenue – FY17 JK Tyres (Standalone) : Segmental contribution to revenue – FY17
Farm and OTR Others

4.0% 2.0%
Farm and OTR,
14.0% LCV
12.0%
Apollo’s standalone
T&B, 41.0% operations derives
~65% of revenue from
the T&B segment and
LCV, 6.0% PCR
~17% from the PCR
15.0%
segment
PCR, 39.0% T&B

67.0%
Source Company, Spark Capital Source Company, Spark Capital
Page 4
End-use market contribution to revenue
Apollo Tyres garners a relatively higher share of its revenue from the ‘more profitable’ replacement market due to 1) higher share of T&B in its
domestic revenue mix and 2) the fact that its European operations (currently) cater only to the replacement PCR segment
CEAT : Revenue contribution by end use market– FY17 Apollo (Consol): Revenue contribution by end use market– FY17
OEM
Exports 14% OEM
23% 23%
Replacement
Replacement 77%
63%
JK Tyres (Standalone): Revenue contribution by end use market– FY17
Exports
10%
OEM ▪ With its segmental contribution similar to that of CEAT,

34%
expect MRF’s end-use market contribution to revenue to
mirror CEAT’s.
Replacement
56%
Source Company, Spark Capital
Page 5
Truck and Bus (T&B) Segment
▪ Contribution to domestic tyre industry revenue : ~55%
▪ Contribution to domestic tyre industry volumes: ~15%
While MRF, JK and Apollo compete closely in the overall T&B space, the latter two dominate in the fast growing
TBR segment, MRF leads in the TBB segment
Expect domestic (OE + Replacement) T&B tyre volumes to grow at a CAGR of ~5% through FY17-FY20E,
compared to ~3% during FY14-FY17 (expect improved realisations to also drive revenue growth)
Anti-dumping duty on Chinese TBR (w.e.f Sep17) coupled with the opening up of the more profitable North
American market for China (w.e.f. Feb17), to taper Chinese imports into India
Expect the trend of radialization to accelerate further led by better economics and improving road conditions –
Apollo (majorly) and JK Tyres to be prime beneficiaries
Apollo seems well poised to benefit from the on-going trend of radialisation, with timely commissioning of
capacities; though JK Tyres has surplus TBR capacities at Cavendish, timely ramp up will be critical
Apollo enjoys the widest range of products in the T&B segment at 160 sizes across 47 categories, followed by
CEAT at 60 sizes across 29 categories
Page 6
T&B Tyre segment Market shares (OEM + Replacement) and Radialisation trends
While MRF, JK and Apollo compete closely in the overall T&B space, the latter two dominate in the fast growing TBR segment, while MRF leads
in the TBB segment
Expect the trend of radialization to accelerate further led by better economics and
T&B Tyres – Market Shares (OEM + Replacement)
improving road conditions
78%
Other Players, 8%- 72%
% of Radialisation by end use market

10%
61%
Imports, 9%-12%
Apollo, 25% 53%
51%
42% 44%
CEAT , 10%-12%
34% 34% 33%
FY17E 25% 26%
22%
17% 19%
11%
JK Tyres, 23%-26%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
MRF, 23%-25%
OEM market Overall T&B market
T&B Radial market shares (OEM + Replacement) – Apollo and JK lead the industry T&B Bias market shares (OEM + Replacement) – MRF continues to enjoy major
in this fast growing segment share in this segment, which is however, expected to decline in volume
Other Players,
Other Players, 8% Imports, <1% 4%-6%
Apollo, 24% CEAT , 12-14%

Imports, 20% Apollo, ~26-28%
FY17E ▪ Apollo has a stronger presence in the T&B

FY17E
replacement market as a whole.
CEAT , 4% ▪ JK Tyres is more dominant in the OEM
JK Tyres, ~20-
market.
MRF, >30% 22%
▪ The above, partially, explains Apollo’s
MRF, 13%
JK Tyres, 31% relatively higher gross margin compared
to JK
Source JK Tyres Presentation, Spark Capital Source Company, Spark Capital
Page 7
Truck and Bus tyre market sizing through FY20E
Expect the domestic T&B volumes to grow at a CAGR of 4.9% through FY17-FY20E; expect the tapering down of Chinese imports to aid domestic
players
CAGR CAGR
FY10E FY11E FY12E FY13E FY14E FY15E FY16A FY17E FY18E FY19E FY20E FY14- FY17- Expect volume recovery in
FY17 FY20 the MHCV (G) space
through FY19-20E, post a
tepid FY18
MHCV (Domestic + Export)
0.27 0.35 0.38 0.29 0.22 0.26 0.34 0.35 0.34 0.38 0.45 15.5% 8.9%
sale volumes (000s)
Expect OEM segment tyre
YoY (%) 32.4% 32.8% 7.2% -23.9% -21.9% 17.4% 28.2% 2.6% -0.7% 11.1% 17.0% volume growth to be aided
by increasing mix of higher
tonnage vehicles,
MHCV OEM Tyre necessitating more no. of
2.0 2.6 3.0 2.4 1.9 2.4 3.2 3.4 3.4 3.8 4.5 20.0% 10.0%
volumes (mn tyres) (a) tyres
YoY (%) 32.4% 32.8% 12.8% -19.9% -17.8% 23.5% 34.9% 2.6% -0.7% 11.1% 17.0%
The average replacement

MHCV Replacement cycle of MHCV Tyres is 6-8
11.9 11.6 11.6 12.5 12.8 12.9 12.9 13.5 13.9 14.1 14.4 1.8% 2.1%
volumes (mn tyres) (b) months. Our estimates
factor in fleet operators’
YoY (%) 18.9% -2.8% 0.0% 8.2% 2.2% 0.7% 0.3% 4.6% 2.8% 1.1% 1.9% propensity to retread the
tyre (thereby extending its
life), prior to replacement
MHCV Tyre Export
1.4 1.5 1.6 1.7 1.7 1.8 1.9 2.0 2.1 2.2 2.4 5.2% 5.0%
volumes (mn tyres) (c)
YoY (%) 5.3% 5.3% 5.3% 5.3% 5.3% 5.3% 5.3% 5.0% 5.0% 5.0% 5.0%
Consequent to the
definitive imposition of the
MHCV Tyre Import ADD on Chinese TBR
0.3 0.3 0.4 0.4 0.5 0.8 1.3 1.4 1.0 1.0 1.0 41.9% -10.7% imports in Sep 17, coupled
volumes (mn tyres) (d)
with the removal of import
YoY (%) 17.6% 17.6% 17.6% 17.6% 17.6% 59.9% 63.9% 9.0% -28.7% 0.0% 0.0% restrictions on Chinese
tyres by the USA, we expect
imports of Chinese tyres to
Domestic T&B Tyre taper and stabilize at lower
15.0 15.4 15.7 16.1 16.0 16.3 16.8 17.5 18.3 18.9 19.9 3.0% 4.9% levels
market (mn nos) (a+b+c-d)
YoY (%) 45.2% 2.3% 2.4% 2.4% -0.8% 2.2% 2.9% 4.1% 5.1% 3.8% 5.8%
Source: ATMA, Spark Capital
Note: FY16 represents actual tyre volume break-down between OEM/Replacement. FY10-FY15 are based on our estimates of the split between these end-use markets (based on overall tyre production data) Page 8
Anti-dumping duty on Chinese TBR (w.e.f Sep17) coupled with the opening up of the more profitable North American market for China (w.e.f.
Feb17), to taper Chinese imports into India
In Sep 2017, the government imposed an anti-dumping duty (ADD) on Chinese imports of TBR tyres. The ADD ranging from $245 to $ 453 per
tonne is expected to raise the effective price of Chinese Tyres by ~8-12%, (per our calculations), thereby narrowing the prior price differential of
~25-30% between a domestic TBR and Chinese TBR tyre
Apollo, importantly, and JK to benefit the most from the imposition of the ADD,
Trends in monthly imports of Chinese TBR tyres prior to imposition of ADD
given their dominance in the T&B Radial segment
Expect the Chinese imports to taper down from levels of ~1.4mn tyres in FY17 to
~1 mn in FY18, and stabilise at lower levels thereon Market share : T&BR TyresOther Players,
8%
2QFY18E 255
1QFY18E 300
4QFY17 177
3QFY17 380
Apollo, 24%
2QFY17 423 Imports, 20%
1QFY17 423
4QFY16 317
3QFY16 313
2QFY16 354
1QFY16 302 FY17E
4QFY15 230
3QFY15 210
CEAT , 4%
2QFY15 176
1QFY15 168
4QFY14 131
3QFY14 126
MRF, 13%
2QFY14 156 JK Tyres, 31%
Chinese Imports of TBR tyres (000s nos)
78
Source Spark Capital

Source ATMA, Industry, Spark Capital
Page 9
Expect the trend of radialisation to accelerate further over the next few years led by better economics and improving road conditions
CAGR CAGR
95%
FY10E FY11E FY12E FY13E FY14E FY15E FY16A FY17E FY18E FY19E FY20E FY14- FY17-
90%
FY17 FY20
MHCV OEM Tyre volumes (mn
2.0 2.6 3.0 2.4 1.9 2.4 3.2 3.4 3.4 3.8 4.5 20.0% 10.0%
tyres) 72% 73%
YoY (%) 32.4% 32.8% 12.8% -19.9% -17.8% 23.5% 34.9% 3.6% 0.3% 12.3% 18.2%
61% 60%
- TBB 1.5 1.7 1.9 1.4 1.0 0.9 0.9 0.7 0.5 0.4 0.2 -8.1% -32.9%
53%
51%
YoY (%) 7.9% 16.8% 12.8% -29.6% -30.5% -1.7% -3.1% -18.6% -27.1% -29.8% -40.9%
42% 44%
- TBR 0.5 0.9 1.0 1.0 1.0 1.5 2.3 2.6 2.8 3.4 4.2 38.2% 17.5%
34% 33%
YoY (%) 313.8% 80.6% 12.8% -1.1% -0.1% 47.8% 59.2% 12.3% 8.0% 20.3% 24.8%
25% 26%
MHCV Replacement Tyre volumes 19%
12.1 11.9 11.9 12.9 13.3 13.7 14.2 14.9 14.9 15.1 15.4 3.9% 1.0%
(incl. imports) (mn tyres)
11%
YoY (%) 18.9% -2.4% 0.5% 8.5% 2.7% 2.9% 3.9% 5.0% -0.1% 1.2% 2.0%
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
- TBB 10.8 10.0 9.7 10.1 9.8 9.0 7.6 6.4 5.8 5.0 4.1 -13.1% -13.8%
YoY (%) 15.0% -7.8% -2.5% 4.2% -3.1% -8.0% -16.3% -14.9% -10.5% -12.7% -17.8% Radialisation % - OEM
Radialisation % Domestic
- TBR (Inc. Imports) 1.3 1.9 2.2 2.8 3.5 4.6 6.6 8.5 9.1 10.0 11.2 34.8% 9.9%
YoY (%) 64.3% 42.2% 16.0% 28.0% 23.7% 33.6% 43.4% 27.7% 7.8% 10.0% 11.9%
- TBR (Excl. Imports) 1.1 1.6 1.8 2.4 3.0 3.8 5.3 7.1 8.1 9.0 10.2 33.5% 13.2% Increase in avg. tonnage to also
lead to higher tyre realisations
YoY (%) 81.6% 48.0% 15.7% 30.0% 24.8% 29.3% 39.2% 32.2% 15.1% 11.2% 13.3%
28.8
27.3
MHCV (OE+ Replacement)
volumes (mn tyres) (incl imports 14.1 14.5 14.9 15.3 15.2 16.1 17.4 18.3 18.2 18.8 19.8 6.3% 2.8% 24.2 24.6
excl. exports)
YoY (%) 20.6% 2.5% 2.7% 2.9% -0.5% 5.5% 8.6% 4.7% 0.0% 3.2% 5.2% 21.1
20.3
18.9 19.0
- TBB 12.3 11.7 11.7 11.5 10.8 10.0 8.5 7.2 6.3 5.4 4.4 -12.6% -15.3%
YoY (%) 14.1% -4.9% -0.2% -1.5% -6.4% -7.4% -15.0% -15.3% -12.2% -14.2% -19.5%
FY13
FY08
FY09
FY10
FY11
FY12
FY14
FY15
FY16
FY17
FY18E
FY19E
FY20E
FY21E
- TBR 1.8 2.8 3.2 3.8 4.4 6.1 9.0 11.1 11.9 13.4 15.5 35.6% 11.8%
YoY (%) 96.5% 52.6% 15.0% 18.8% 17.5% 36.8% 47.2% 23.7% 7.9% 12.4% 15.2% Average Tonnage (MHCV Goods)
Capacity additions by Industry Majors – T&B Radial segment
Apollo seems well poised to benefit from the on-going trend of radialisation; though JK has surplus TBR capacities at Cavendish, timely ramp up
will be critical
FY17 exit capacities FY20 exit capacities
Incremental Capacity Additions (mn tyres p.a.)
TBR (mn tyres p.a.)
Sep-17 Sep-19 Dec-18 Mar-20
(mn tyres p.a.)
2.3 0.5 0.9 3.6
3.5 3.5
0.4 0.4 0.8
0.3 0.3 0.5
0.9 0.5 1.4
Imports 1.4 1.0
Total Capacity
8.7 10.8
(excl. MRF)
Source: Industry, Spark Capital
Note: MRF’s capacities are not available Page 11

Capacity additions by Industry Majors – T&B Radial segment
Apollo seems well poised to benefit from the on-going trend of radialisation; though JK has surplus TBR capacities at Cavendish, timely ramp up
will be a key monitorable
TBR capacity additions
▪ Apollo Tyres is in the midst of a capex programme to enhance its TBR capacities at Chennai from 1.8mn tyres p.a. to 3.6mn tyres p.a.
▪ As at Sep17, its TBR capacities stood at ~2.7 mn tyres p.a., with a production run-rate of ~2.4mn tyres p.a.
▪ Expect full ramp up to 3.6 mn tyres p.a. to be achieved by 1HFY19
▪ It is expected to commence work on a greenfield plant in AP soon, however, it has not yet announced firm plans of segmental capacities to be set up
at the plant
▪ JK Tyres has cumulative TBR capacities of 3.5mn tyres p.a. Of this, JK Tyres’ own capacities (excluding Cavendish) of 2.3mn tyres p.a. (incl Chennai
expansion) were being fully utilized as at Sep 17.
▪ Cavendish ‘s TBR capacities of 1.2mn tyres p.a. were being utilized only at ~45%, as at Sep 17. Hence, we believe that JK might not incur any significant
expansion of its TBR capacities over the near term.
▪ CEAT’s TBR capacities of ~0.4mn tyres p.a. at Halol (currently fully utilised) are expected to be enhanced to 1.6mn tyres p.a. by FY22.
▪ Expect the same to come on-steam in phases. Expect exit capacities of 0.8mn tyres p.a. in FY20E
▪ Michelin is expanding its TBR capacities from the existing levels of 0.3mn tyres p.a. to ~0.5mn tyres p.a.
▪ Expect these to come on-stream in phases by end of CY18
▪ Bridgestone has announced plans to enhance its overall tyre production capacities (PCR+TBR) by an estimated 4.5mn tyres p.a., bringing total
capacities to ~12.3 mn tyres by 2022.
▪ Expect the bulk of the aforesaid capacity additions to be in the PCR space; expect the existing TBR capacities of ~0.9mn tyres p.a. to increase to ~1.4
mn tyres p.a. by FY20E
▪ In Jan17, MRF announced a greenfield project in Gujarat, involving an outlay of ~Rs. 4.5bn (to be invested in a phased manner over a period of 10
years). However, the company has not yet announced segment wise capacities proposed to be set up
Imports ▪ Expect the Chinese imports of TBR tyres to taper down from levels of ~1.4mn tyres in FY17 to ~1 mn in FY18, and stabilise at lower levels thereon
Page 12
Capacity additions by Industry Majors – T&B Bias
With radialisation being the order of the day, do not foresee material additions in the TBB space; expect TBB capacities to gradually get
converted into OTR/speciality tyre capacities
Incremental
Capacity
FY17 exit Additions FY20 exit
capacities (mn tyres p.a.) capacities
TBB (mn tyres p.a.) (mn tyres p.a.)
▪ JK has cumulative TBB capacities of 2.5mn tyres p.a.(1.8mn tyres p.a. in its own
facilities, 0.7mn tyres p.a. in Cavendish).
2.5 n/a 2.5
▪ As at Sep 17, the Cavendish facilities were being utilized at ~35%, while JK’s
facilities were being utilized at ~65-70%.
▪ CEAT has TBB capacities of ~1.3mn tyres p.a. (Nasik 0.5mn tyres p.a. and Bhandup
0.8 mn tyres p.a.)
1.3 n/a 1.3
▪ With low utilisation levels, CEAT does not plan to enhance these capacities; these
facilities could potentially be converted into OTR/speciality tyres
▪ APTY has TBB capacities of ~3mn tyres p.a.. Utilisation levels as at Sep17 stood at
3.0 n/a 3.0 ~70%.
▪ There are no plans to expand these facilities
Total Capacity
6.8 6.8
(excl. MRF)
▪ In Jan17, MRF announced a greenfield project in Gujarat, involving an outlay of

~Rs. 4.5bn (to be invested in a phased manner over a period of 10 years).
However, the company has not yet announced segment wise capacities proposed
to be set up
Page 13
T&B Segment - Range of product offerings
Apollo has the highest range of offerings across the T&B segment, and hence dominates in the replacement market
Rim Size
Apollo towers over the rest in range of offerings Sizes
Minimum Maximum
Jet One 2 20 20
Jet Xtra Load 3 20 20
Across 29 categories
60 JET TRAK 39 XTRA 2 20 20
JET ROCK XTRA 2 20 20
JET R PLUS 2 20 20
Across 30 categories JET XTRA 3 20 20
55 JET R MILES 4 20 20
JET ACE 1 20 20
JET R XTRA MILES 1 20 20
Jetway JUL 1 2 22.5 (Tubeless) 22.5 (Tubeless)
161 Jetway JUH 2 22.5 (Tubeless) 20
Jetway JTH 2 20 20
Jetway JUX 3 20 22.5 (Tubeless)
Jetway JUC 3 2 20 22.5 (Tubeless)
54 Jetway JUH 4 1 20 20
JetSteel JDL 2 20 22.5 (Tubeless)
JetSteel JDE 1 20 20
No of sizes
JetSteel JDC 3 20 20
Jetway JUC 2 3 20 20
T&B Segment – Market shares
JetSteel JDH 5 20 20
Other Players, Jetway JUH 3 4 20 20
Imports, 9%- 8%-10%
JETWAY JUH5 1 20 20
12% Apollo, 25%
JETSTEEL JDH3 1 20 20
CEAT , 10%- JETWAY-JUH 3+ 1 20 20
12%
Jetway JDC 3 1 20 20
Total 54
JK Tyres, 23%- Distribution network (across all segments) Apollo CEAT JK Tyres MRF
26%
Exclusive dealers 1,700 490 n/a 3200
MRF, 23-25%
Non-exclusive dealers 3,600 4010 n/a 1800
Total 5,300 4,500 4000 5000
Page 14
Rim Size Rim Size
Sizes Sizes
Minimum Maximum Minimum Maximum
Bullet 10 16 20 Endumile LHD 3 20 22.5
Mine Lug 4 20 24 Endumile LHA 6 22.5 22.5
Haulug 2 20 20 Enducomfort CA 1 22.5 22.5
XT-9 Gold 1 20 20
Endutuff SOD 3 20 22.5
Amar Deluxe 16 16 20
Amar Gold 8 16 20 Amar 2 20 20
XT100K 1 20 20 Kaizen 99R Plus 7 20 20
Duramile 1 16 16 XT100 1 16 16
Kaizen 27L 2 20 20 ALT118 1 25 25
ST5 4 20 20
ARG217 2 24 24
Kaizen 50L HD 1 20 20
Kaizen 77R 1 20 20 AWL812 1 25 25
Cargomiler 5 20 20 ENDURACE MD PLUS 1 20 20
Champion DXL 1 20 20 Total 161
Kaizen 36L 2 20 20
Champion 2 20 20
XT-1 1 20 20
Endu race CD 1 22.5 22.5
Endu race LD 2 20 20
Endu race MA326 1 20 20
Endu race HA 2 22.5 22.5
Endu race RT 5 22.5 22.5
Endu race RA 12 16 22.5
XT7 Gold HD 1 20 20
Endurace RD 7 16 22.5
Endurace LDR 3 20 20
Endurace MA731 1 20 20
Endurace RA1 1 20 20
Endurace MD 4 20 20
XT7 4 20 20
XT7 GOLD PLUS 4 16 16
XMR 3 16 20
Endurace RD23 3 22.5 22.5
Endurace RT29 1 22.5 22.5
Endutrax MA 10 22.5 24
Endutrax MD 6 22.5 24 Source: Industry, Spark Capital
Page 15
Rim Size Rim Size
Sizes Sizes
Minimum Maximum Minimum Maximum
SUPER MILER 909 3 20 20 HCL Super 2 20 20
SUPER MILER 99 4 20 20 LYFMUX LUG 1 20 20
STEEL MUSCLE-S1R4 3 20 20 LYFMAX RIB (TRUCK) 2 20 20
STEEL MUSCLE-S1T4 2 20 20 Mile XL 4 20 20
M-77 5 20 24 Mile XL Rib 4 20 20
STEEL MUSCLE-S1M4 PLUS 1 20 20 Mile XL Rib (Bus) 4 20 20
STEEL MUSCLE-S1M4 3 20 20 Trac XL 2 20 20
SUPER LUG-707 2 20 20 WINMILE - R 5 20 22.5
SUPER LUG-505 2 20 20 WINMILE - R (Bus) 5 20 22.5
M LUG-555 D 1 20 20 WINSUPER - D 1 20 20
SUPER LUG FIFTY 2 20 20 HCL Super HL 1 20 20
STEEL MUSCLE-S3P4 1 20 20 Lug Plus 1 20 20
STEEL MUSCLE-S3K4 2 20 20 Mile XL SL + HD 2 20 20
SUPER LUG-FIFTY PLUS 3 20 20 Mile XL SL + HD (Bus) 2 20 20
SUPER LUG 999+ 1 20 20 Super Dumper HD 1 20 20
THE LUG-PLUS 2 20 20
WINLOAD - D 1 20 20
STEEL MUSCLE-S3C8 Plus 1 20 20
WINLOAD - D (Tipper) 1 20 20
STEEL MUSCLE-S3C8 1 20 20
WINMILE - D 3 20 22.5
SUPER LUG-FIFTY PLUS-R 1 20 20
LYFMAX Rib (Bus) 2 20 20
SUPER LUG 999 1 20 20
WINMILE - AW 1 20 20
STEEL MUSCLE-S1R4 PLUS 1 22.5 22.5
FM Super 2 20 20
STEEL MUSCLE-S1M4 1 22.5 22.5
FM Super (Bus) 2 20 20
STEEL MUSCLE S3J4 1 22.5 22.5
STEEL MUSCLE SSR1 1 22.5 22.5 HCL Miler + HD 1 20 20
MUSCLEROK 2 20 20 Lug XL 2 20 20
MUSCLEROK-X 4 20 24 Lug XL Pro 2 20 20
MUSCLEROK-H 1 24 24 Mile XL Pro 1 20 20
STEEL MUSCLEROK-ML 111 1 24 24 Mile XL Rib Pro 2 20 20
STEEL MUSCLE-S3K4 1 20 20 Mile XL Rib Pro (Bus) 2 20 20
STEEL MUSCLE-S1R4 1 25 25 RD Super 1 20 20
Total 55 Total 60
Page 16
2W/3W Tyres
Expect the share of the OE market to increase through FY20E led by underlying volume growth; lower volume
growth through FY12-FY14 is expected to impact the replacement market volume growth through FY20E (expect
improved realisations to also drive revenue growth)
With major players including – MRF, TVS Tyres and CEAT expected to set up capacities aggressively, expect
competitive intensities to sustain
MRF enjoys the widest range of products in the 2W segment at 140 sizes across 47 categories, followed by
CEAT at 107 sizes across 26 categories
Page 17
2W and 3W tyre market sizing through FY20E
Expect the share of the OE end market to increase through FY20E led by underlying volume growth; lower volume growth through FY12-FY14 is
expected to impact the replacement volume growth through FY20E
CAGR CAGR
FY17 FY20
2W (Domestic + export)
10.5 13.3 15.4 15.8 16.9 18.5 18.9 19.9 22.4 24.7 28.2 5.7% 12.3% Expect underlying 2W
volumes
volumes to register a
robust volume CAGR of
24.9% 26.6% 15.6% 2.4% 7.2% 9.3% 2.6% 5.2% 12.5% 10.0% 14.4% 12% led by continued
scooterisation, and
expected robust growth in
3W (Domestic + export) underlying vehicle volumes
0.6 0.8 0.9 0.8 0.8 0.9 0.9 0.7 0.8 0.9 1.0 -3.7% 10.0%
volumes
23.3% 29.7% 9.9% -3.8% -0.9% 12.8% 0.3% -21.0% 6.8% 10.0% 13.1%
2W + 3W OEM Tyre market (# of

23.3 29.6 34.1 34.7 36.9 40.4 41.4 42.6 47.7 52.5 60.0 4.9% 12.1%
tyres, mn)
24.7% 27.0% 15.0% 1.8% 6.4% 9.6% 2.4% 2.9% 12.1% 10.0% 14.3% Typical replacement cycle
for 2W ranges from 2-4
years
Weaker volume growth
2W + 3W Replacement Tyre through FY12-FY14 is
25.9 33.6 33.0 24.4 26.5 35.6 37.7 41.6 45.1 47.9 51.5 16.1% 7.4%
market (# of tyres, mn) expected to impact
replacement volume
16.0% 29.9% -1.9% -26.0% 8.7% 34.0% 6.1% 10.2% 8.6% 6.1% 7.7% growth through FY20E
Total (2W+3W,
OEM+Replacement) (# of tyres, 49.2 63.3 67.1 59.1 63.4 76.0 79.1 84.1 92.9 100.4 111.6 9.9% 9.9%
mn) (Per ATMA)
20.0% 28.5% 6.0% -11.9% 7.3% 19.8% 4.1% 6.3% 10.4% 8.1% 11.2%
2W and 3W tyre market sizing through FY20E
Expect share of OE volumes to increase led by expected robust growth in underlying With the consistent increase in the share of Premium motorcycles in the revenue mix,
vehicle volumes expect realisations (both OE and replacement) to improve further going forward
FY20E 54% 46%

FY19E 52% 48% 17% 18% 17% 16% 17% 19% 21% 25%
FY18E 51% 49%
FY17 51% 49%
FY16 52% 48% 57% 54% 59% 57% 58% 59% 56% 52%
FY15 53% 47%
FY14 58% 42%
FY13 59% 41% 27% 27% 27%
25% 25% 22% 23% 23%
FY12 51% 49%
FY11 47% 53% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
FY10 47% 53%
Economy Executive Premium
OEM % Replacement %
Source Spark Capital Source Spark Capital
Market Shares – 2W segment
2W/3W market shares
Others, ~10%
CEAT, 25-30%
TVS Tyres, 25-

30%
MRF, ~33-35%
Source: Industry, ATMA, Spark Capital
Page 19
Capacity additions by Industry Majors – 2W tyres
With major players– MRF, TVS and CEAT expected to set up capacities aggressively, expect competitive intensity to sustain
Incremental Capacity Additions
FY17 exit (mn tyres p.a.) FY20 exit
capacities capacities
2W (mn tyres p.a.) (mn tyres p.a.)
Sep-18 Mar-20
▪ JK’s 2W capacities of 6.3mn tyres p.a. are being utilized at
~50-55% as at Sep 17.
6.3 6.3
▪ Hence, do not expect any material capacity additions over
the near term
▪ CEAT’s existing capacity is ~32.4 mn tyres p.a. (of which
capacities of 8.4mn tyres p.a. are part of an on-going plan to
enhance capacities by 14.4mn tyres p.a.).
6.0 4.8 ▪ CEAT plans to expand its capacities by a further 14.4 mn tyres
32.4 43.2
p.a. at Nagpur, by FY22, of which we expect capacities of
4.8mn tyres p.a. to come on-stream by FY20
▪ TVS tyres has recently expanded capacities from 27.6mn

tyres p.a. to 30 mn tyres p.a.
30.0 6.0 36.0 ▪ Expect TVS to gradually enhance capacities further by ~6mn
tyres p.a. through FY20. However, management has not
stated any such plan explicitly
Total Capacity
68.7 85.5
(excl. MRF)
▪ Apollo Tyres is expected to commence work on a greenfield plant in AP soon, however, has not yet announced firm plans of segmental capacities to
be set up at the plant
Page 20
2W Segment - Range of product offerings
MRF has the highest range of offerings in the 2W segment, reflected in its dominant market share
Price range – Price range –
MRF has the widest range of products in the 2W space Sizes Description
Min (Rs.) Max (Rs.)
SECURA F85 5 925 1,560 Good grip on wet surfaces, Speed enhancing
SECURA NEO 4 1,015 1,198 Low noise, Long tread life
ZOOM D 4 1,025 1,240 Better durability, Good grip, Improved handling
Milaze (Scooter) 5 1,060 1,190 Fuel efficient, Long tread life, Good grip, Improved
MILAZE 17 1,075 2,150 handling, Resistant to cuts and abrasions
107 Fuel efficient, Long tread life, Good grip, Improved
SECURA SPORT 6 1,080 2,700
handling
Good grip, Improved handling, Resistant to cuts and
Gripp (Scooter) 3 1,100 2,785
abrasions
Zoom XL F 3 1,245 2,030 Better durability, Good grip, Improved handling
GRIPP 11 1,034 2,135 Good grip, Improved handling, Resistant to cuts and
Gripp F 4 1,435 1,999 abrasions
SECURA ZOOM F 4 1,440 1,620 Fuel efficient, Long tread life, Good grip, Improved
140 Secura Zoom Plus 1 handling
1,610 1,610
ZOOM PLUS F 3 1,493 2,105
ZOOM XL 9 1,450 3,020 Better durability, Good grip, Improved handling
ZOOM 5 1,700 2,375
Across 53 categories Good grip, High Safety, Improved handling, Resistant to
VERTIGO SPORT 3 1,719 2,420
cuts and abrasions
SECURA F 67 1 1,980 1,980 Fuel efficient, Long tread life, Good grip, handling
97 Zoom Plus 4 1,557 2,595 Better durability, Good grip, Improved handling
Zoom Rad 1 3,550 Better durability, Good grip, Improved handling
3,550
No. of Sizes SECURA F85 Plus 2 1,104 1,500
SECURA ZOOM 4 1,479 1,600 Fuel efficient, Long tread life, Good grip, Improved
SECURA M86 2 1,482 1,503 handling
2W/3W market shares
SECURA M72 1 1,499 1,499
Others, ~10% Fuel efficient, Long tread life, Good grip, Improved
MILAZE SUPER 2 1,624 1,624
handling, Resistant to cuts and abrasions
CEAT, 25-30% Gripp XL 2 2,352 2,705 Good grip, Improved handling, Resistant to cuts
TVS Tyres, 25- Zoom F 1 Better durability, Good grip, Improved handling
2,526 2,526
30%
Total 107
Distribution network (across all segments) Apollo CEAT JK Tyres MRF
MRF, ~33-35%
Non-exclusive dealers 3,600 4010 n/a 1800
Source: Industry, Spark Capital Total 5,300 4,500 4000 5000
Page 21
Price Price Price
Price
range – range – range –
Sizes Description Sizes range – Description
Min Max Max
Min (Rs.)
(Rs.) (Rs.) (Rs.)
Fuel efficient, Better durability, Good grip, Improved ATT 1050 1 1378 1378
Conta 325 2 1,120 1,150
handling ATT 450 1 1460 1460
Low noise, Long tread life, Fuel efficient, Improved ATT 725 TL 1 1466 1466
JUMBO 3 887 1,400 Good grip, Improved handling, Better durability
handling
ATT 175 3 1,469 1,511
Conta 2 702 702 Fuel efficient, Better durability, Good grip, Improved
ATT 525
Conta 350 2 888 888 handling 2 1,474 1,512
EUROGRIP
ATT 725 1 903 903
Good grip, Improved handling, Better durability Good grip, High Safety, Improved handling, Resistant to
Simha 2 930 930 RIB STIFFER 1 1498 1498
cuts and abrasions
Resistant to cuts and abrasions, Long tread life, Good
DRAGON 4 933 1,488 ATT 425 1 1539 1539 Good grip, Improved handling, Better durability
grip, Improved handling
Good grip, High Safety, Improved handling, Resistant to
Good grip, High Safety, Improved handling, Resistant to ORION 1 1563 1563
Stud 4 960 960 cuts and abrasions
cuts and abrasions
Resistant to cuts and abrasions, Long tread life, Good ATT 1050
Stylo 4 1 1674 1674
987 987 EUROGRIP
grip, Improved handling Good grip, Improved handling, Better durability
Good grip, High Safety, Improved handling, Resistant to ATT 150 3 1700 1700
Raksha 3 1,003 1,111 ATT 750 1 1780 1780
cuts and abrasions
Conta 550 1 1013 1013 Fuel efficient, Better durability, Good grip, Improved Low noise, Long tread life, Fuel efficient, Improved
Jumbo poly x 4 1,853 3,378
CONTA 250 1 1021 1021 handling handling
Resistant to cuts and abrasions, Long tread life, Good Resistant to cuts and abrasions, Long tread life, Good
Mega star plus 1 1062 1062 Crusader 1 1900 1900
grip, Improved handling grip, Improved handling
Good grip, High Safety, Improved handling, Resistant to ATT 825 2 2,000 2,133 Good grip, Improved handling, Better durability
RIB 6 1,070 1,256 PANCER 1 2224 2224 Resistant to cuts and abrasions, Long tread life, Good
cuts and abrasions
Resistant to cuts and abrasions, Long tread life, Good Rambo 1 2933 2933 grip, Improved handling
SC 36 2 1,106 1,421
grip, Improved handling ATT 325 2 n/a n/a Good grip, Improved handling, Better durability
Good grip, High Safety, Improved handling, Resistant to ANACONDA 1 n/a n/a Good grip, Improved handling
Olivia 1 1204 1204
cuts and abrasions ATT 250 2 n/a n/a Good grip, Improved handling, Better durability
Resistant to cuts and abrasions, Long tread life, Good Good grip, High Safety, Improved handling, Resistant to
DRAGON PRO 1 1244 1244 ATT RIB 2 n/a n/a
grip, Improved handling cuts and abrasions
ATT 125 1 1289 1289 Good grip, Improved handling, Better durability ATT 250 R 1 n/a n/a Good grip, Improved handling, Better durability
Resistant to cuts and abrasions, Long tread life, Good Resistant to cuts and abrasions, Long tread life, Good
Star Plus 5 1296 1296 Tusker 2 n/a n/a
grip, Improved handling grip, Improved handling
ATT 350 2 1308 1308 Eurogrip 1 n/a n/a Good grip, High Safety, Improved handling, Resistant to
ATT 525 2 1330 1330 Good grip, Improved handling, Better durability
Terminator 1 n/a n/a cuts and abrasions
ATT 525 TL 2 1,333 1,395
Good grip, High Safety, Improved handling, Resistant to ATT 550 1 n/a n/a
RIB EUROGRIP 1 1333 1333
cuts and abrasions
ATT 750M TL 1 n/a n/a
Good grip, High Safety, Improved handling, Resistant to Good grip, Improved handling, Better durability
SC 79 1 1351 1351
cuts and abrasions ATT 400 1 n/a n/a
Good grip, High Safety, Improved handling, Resistant to SN 79 1 n/a n/a
RIB PLUS 2 1,377 1,530
cuts and abrasions
Total 97
Source: Industry, Spark Capital Page 22
Price Price Price Price
range – range – range – range –
Sizes Description Sizes Description
Min Max Min Max
(Rs.) (Rs.) (Rs.) (Rs.)
Nylogrip Plus Zapper FX1 1 1750 1750
3 900 975
Scooter Fuel efficient, Long tread life, Good grip, Improved handling, Zapper FY2 1 1750 1750
Nylogrip 001 1 900 900 Resistant to cuts and abrasions
Zapper S 3 1,800 3,400
Nylogrip Plus 8 940 1800
Fuel efficient, Better durability, Good grip, Improved
Fuel efficient, Long tread life, Good grip, Improved handling, Zapper Q 11 1,850 3,083
Nylogrip FE 1 950 950 handling
Resistant to cuts and abrasions Zapper P 2 1,550 1,850
Zapper D
1 1050 1050 Better durability, Good grip, Improved handling Zapper 3 1,850 2,499
(Scooter)
Zapper Vyde 5 1,850 7,500
ZAPPER
3 1050 1050
(Scooter) Fuel efficient, Better durability, Good grip, Improved Revz S 1 2600 2600
Zapper FG 2 1,150 1,770 handling Revz FC 1 2687 2687
Zapper FS 10 1,300 1,669
Revz M 1 2975 2975 Resistant to cuts and abrasions, Long tread life, Good grip,
Good grip, Improved handling, Resistant to cuts and
Rib-Rib Plus 5 1,350 1,600 Revz Y 2 Improved handling
abrasions, Fuel efficient 2,975 5,000
Good grip, High Safety, Improved handling, Resistant to cuts Revz 2 2,975 3,500
RIB 4 1,350 1,700
and abrasions, Fuel efficient
Revz C 1 3500 3500
MoGrip
5 1,500 1,850 Zapper FS 1 1 1237 1237
Moto D
Better durability, Good grip, Improved handling Zapper Kurve Fuel efficient, Better durability, Good grip, Improved
MoGrip 2 1,352 1,474
3 1,550 1,800 F handling
Meteor M
Zapper FYM 1 1394 1394
Zapper FQ 4 1,550 1,750
Fuel efficient, Better durability, Good grip, Improved Good grip, High Safety, Improved handling, Resistant to cuts
Zapper FY1 1 1550 1550 Masseter-FX 2 1425 1425
handling and abrasions
Zapper RF 1 1600 1600
Nylogrip ST Fuel efficient, Long tread life, Good grip, Improved handling, Zapper C1 1 1530 1530 Fuel efficient, Better durability, Good grip, Improved
2 1600 1600
Plus Resistant to cuts and abrasions Zapper Kurve 2 1,987 2,015 handling
Zapper FV 1 1600 1600 Good grip, High Safety, Improved handling, Resistant to cuts
Zapper YM 2 1,600 1,900 Masseter-X 4 2,175 3,800
and abrasions
Zapper FM 2 1,600 1,950 Fuel efficient, Better durability, Good grip, Improved
Fuel efficient, Better durability, Good grip, Improved Zapper S1 1 2575 2575
Zapper Y 9 1,650 6,500 handling
handling
Zapper C 12 1,650 2,404 Resistant to cuts and abrasions, Long tread life, Good grip,
Revz FC1 1 3114 3114
Zapper FY 2 1,650 1,900 Improved handling
Zapper FX 1 1700 1700 Resistant to cuts and abrasions, Long tread life, Good grip,
Revz C1 1 4083 4083
Improved handling
MoGrip
7 1,750 2,400 Better durability, Good grip, Improved handling Total 140
Meteor
Page 23
PCR
Expect the share of the OE end market to increase through FY20E led by underlying volume growth; lower
volume growth through FY12-FY14 is expected to impact the replacement volume growth through FY20E
(expect improved realisations to also drive revenue growth)
CEAT is expected to lead in PCR capacity additions over the near term
Bridgestone enjoys the widest range of products in the PCR segment at 277 sizes across 29 categories, followed
by MRF with 216 sizes across 40 categories
Page 24
PCR market sizing through FY20E
CAGR CAGR
FY17 FY20
PV (Domestic+Export) sale volumes (mn) 2.4 3.0 3.1 3.2 3.1 3.2 3.4 3.8 4.1 4.5 4.9 7.1% 8.5% Expect underlying PV
volumes to register a
robust volume CAGR of
YoY (%) 27.0% 23.3% 6.2% 3.3% -4.4% 4.0% 6.8% 10.5% 8.5% 8.5% 8.5% ~9%
PCR OEM Tyre market

11.9 14.7 15.6 16.1 15.4 16.0 17.1 18.9 20.5 22.2 24.1 7.1% 8.5%
(# of tyres, mn)
YoY (%) 27.0% 23.3% 6.2% 3.3% -4.4% 4.0% 6.8% 10.5% 8.5% 8.5% 8.5%
Typical replacement
cycle for PV ranges
PCR Replacement from 2-4 years
8.3 11.5 11.6 14.3 14.5 17.7 24.8 29.0 31.7 34.6 36.7 25.9% 8.2%
(# of tyres, mn) Weaker volume growth
through FY12-FY14 is
expected to impact
YoY (%) 8.3% 38.2% 0.4% 23.7% 1.4% 21.7% 40.6% 16.6% 9.6% 8.9% 6.2%
replacement volume
growth through FY20E
PCR Exports
1.2 1.5 1.6 1.7 1.8 2.1 2.3 2.4 2.6 2.7 2.8 11.1% 5.0%
(# of tyres, mn)
YoY (%) 25.0% 25.0% 5.3% 5.3% 5.3% 17.6% 11.1% 5.0% 5.0% 5.0% 5.0%
Total PCR tyres , OEM + Replacement)

21.4 27.7 28.7 32.1 31.7 35.7 44.2 50.3 54.8 59.5 63.6 16.7% 8.2%
(# of tyres, mn)
YoY (%) 18.9% 29.1% 3.7% 11.6% -1.3% 12.9% 23.8% 13.7% 9.0% 8.5% 7.0%
PCR tyre market sizing through FY20E
Expect share of OE volumes to increase led by expected robust growth in underlying
vehicle volumes Market Shares – PCR segment
FY20E 54% 46% PCR market shares

FY19E 52% 48%
CEAT, ~10%-12%
FY18E 51% 49%
FY17 51% 49%
FY16 52% 48%
FY15 53% 47%
FY14 58% 42% Others (incl MRF, ~~25-27%
FY13 59% 41% Bridgestone), ~35%
FY12 51% 49%
FY11 47% 53%
FY10 47% 53%
OEM % Replacement % JK Tyres, ~10-12%

Apollo, ~17%
Source Company, Spark Capital Source Company, Industry, Spark Capital
With the consistent increase in the share of Premium vehicles and UVs in the revenue mix, expect realisations (both OE and replacement) to improve further going forward
9% 11% 11% 9% 10% 10% 8%

12% 25%
14% 15% 21% 22% 19%
23% 21%
21% 21% 21%
22%
25% 28% 25% 34%
29% 32% 14%
13%
56% 51% 45% 44% 38% 36% 38%
FY11 FY12 FY13 FY14 FY15 FY16 FY17

FY11 FY12 FY13 FY14 FY15 FY16 FY17
Entry Hatch Premium Hatch Entry Sedan Premium Sedan
UV as % of PV
Source SIAM, Spark Capital
Page 26
Capacity additions by Industry Majors – PCR tyres
CEAT is expected to lead in capacity additions over the near term

FY17 exit Incremental Capacity Additions FY20 exit
PCR capacities (mn tyres p.a.) capacities
(mn tyres p.a.) Sep-18 Mar20 (mn tyres p.a.)
▪ JK has PCR capacities of 9.9 mn tyres p.a. in India. These were being utilised
9.9 9.9 at ~ 85% at Sep 17
▪ Management has not indicated any capex plans in this segment
▪ Capacities of ~5.8mn tyres p.a. being currently utilised at ~80-85%

▪ Expect 1.8mn tyres p.a. capacity to come on-stream by Sep 18, post which it
4.4 3.2 1.2 8.8 will embark upon a greenfield expansion by 6 mn tyres p.a. which would
come on-stream in phases through FY22
▪ The current capacity of ~10mn tyres p.a. is being fully utilised. The same is
1.8 expected to be enhanced by ~1.5mn tyres p.a. by 1HFY19 as part of the
10.5 1.5 13.8 earlier announced expansion plan. Expect the upcoming de-bottlenecking
plans to separately add ~1.8mn tyres p.a to the capacities
▪ Bridgestone has announced plans to enhance its overall tyre production

capacities (PCR+TBR) by an estimated 4.5mn tyres p.a., bringing total
capacities to ~12.3 mn tyres by 2022.
6.9 2.3 9.2 ▪ Expect the bulk of the aforesaid capacity additions to be in the PCR space;
expect the existing capacities PCR capacities of ~6.9mn tyres p.a. to increase
to ~9.2 mn tyres p.a. by FY20
Total Capacity
68.7 85.5
(excl. MRF)
Page 27
PCR Segment - Range of product offerings
Bridgestone has the highest range of offerings in the PCR segment, followed by MRF
Bridgestone and MRF have strong offerings in the PCR segment PCR market Shares
PCR market shares

162
CEAT,
~10%-12%
Others (incl
Bridgestone
85 ), ~35%
MRF, ~~25-
27%
277
82
JK Tyres,
Apollo, ~10-12%
~17%
216
Distribution network (across all
Apollo CEAT JK Tyres MRF
segments)
152

97 Non-exclusive dealers 3,600 4010 n/a 1800
Total 5,300 4,500 4000 5000

No. of Sizes
Page 28
Min Max Min Max
(Rs.) (Rs.) (Rs.) (Rs.)
Fuel efficient, Better durability, Good grip all season,
MILAZE 27 2,040 6,140 Low noise, Improved handling, Good wet grip Amazer 3G 10 1,750 2,600
better handling
High fuel efficiency (7% more), Better durability, Good Amazer XL 28 1,900 5,528 Improved handling, Good wet grip, long tread life
Fuel Smarrt 12 2,825 7,195
grip
Amazer 4G 13 2,200 3,400 Better durability, Good grip, Improved handling
Milaze LT 2 3,345 6,305 Better durability, Good grip, Improved handling Amazer 4G
16 2,250 4,800 All season grip, long tread life
Life
Good grip, Improved handling, Low noise, Long tyre
GRIPP LN 13 3,203 6,065 Alnac 5 2,750 3,900 Improved handling, Better stability, long tread life
life
Amazer 3G
Resistant to cuts and abrasions, High load bearing 7 3,245 4,233 Superior traction, high braking efficiency
Steelplus 1 6,200 6,200 Maxx
capacity, All-terrain traction, Improved handling
Resistance to punctures, Better cornering capabilities, Alnac 4Gs 5 3,700 4,500 Great stability and handling, Quiet ride
CZAR H/T 8 4,988 Safe on rough turmacs, Superior grip, Improved
7,790 Alnac 4G 15 3,800 8,310 Superior traction, Better durability
handling
FORMULA-1 Excellent grip, Resistance to cuts and abrasions, Long Apterra HLS 4 4,800 4,800 High comfort, Quiet ride, Superior traction
2 6,320 6,390
STEEL BT tread life, High load bearing capacity
Comfortable ride, Superior high speed stability, Apterra HT 15 5,000 9,800 High comfort, Quiet ride, Superior traction
CZAR HP 4 7,460 9,795
Efficient braking, Superior grip High Comfort, quick response, High safety, Quiet
Apterra AT 7 5,500 10,879
Comfortable ride, Superior high speed stability, ride
CZAR A/T 5 5,724 High Comfort, quick response, High safety, Quiet
10,135 Efficient braking , Superior grip Apterra HP 7 6,000 17,700
ride
Superior high speed stability, Efficient braking, MANCHESTER
CZAR Sports 2 7,066 7,905 1 6,238 6,238 High traction, Quiet ride
Superior grip, Comfortable ride UNITED
Good grip, Improved handling, Efficient braking, Long Apterra HL 1 7,000 7,000 High traction, Quiet ride
Rhino 2 4,791 5,878
tyre life
High Comfort, quick response, High safety, Quiet
Aspire 11 7,180 12,530
Good overall traction, Improved handling, Long tyre ride
Milaze X3 19 1,958 3,769
life, Better durability High Comfort, quick response, High safety, Quiet
Aspire 4G 7 8,335 12,406
ride
Total 97 Total 152
Page 29
Price Price Price
Price
range – range – range –
Sizes Description Sizes range – Description
Min Max Max
Min (Rs.)
(Rs.) (Rs.) (Rs.)
Fuel efficient, Better durability, Good grip all season, better VTM 1 5800 5800 Improved handling, All terrain grip
ZEC 3 1,600 2,500
handling Wanderer
4 5,800 8,900 Improved handling, All terrain grip
Sport
ZVTS 34 1,800 5,064 Low noise, Improved handling, Good wet grip High Comfort, Superior grip, Improved handling, long tread
ZVRL 2 6,000 6,100
Resistance to punctures, Better cornering capabilities, Safe life
ZCC 3 1,850 3,357 Fuel efficient, Good overall traction, Great stability and
on rough turmacs, Superior grip, Improved handling Legend 3 2,240 3,337
handling,
Good overall traction, Better stability and handling, fuel
SW99 4 1,950 2,149 ZVTSM 1 2250 2250 All terrain grip, Long tread life
efficient
ZCT 2 2,381 2,538 High load bearing capacity, Resistant to cuts and abrasions
ZVT 18 2,000 6,900 High Comfort, Good wet grip ZWYDE 2 2,388 2,972 Excellent grip, Long tread life, Great stability and handling,
Resistant to cuts and abrasions, High load bearing capacity, ZTX A1 4 2,517 4,300 Firm grip, quick response,
SM12 5 2,100 4,071 High Comfort, Superior grip, Improved handling, long tread
All-terrain traction, Improved handling, long tread life ZVTS F 2 3,250 3,600
life
ZTX 9 2,100 5,597 Good Stability, Extra traction High Comfort, Superior grip, Improved handling, long tread
ZVTS A1 1 3749 3749
life
High Comfort, Superior grip, Improved handling, long tread
ZLX 6 2,100 2,650 High Comfort, Firm grip, quick response, Great stability
life Twintread 6 3848 3848
and handling, High safety
ZV2K 23 2,200 8,050 Good wet grip, High Comfort High Comfort, Firm grip, quick response, Great stability
NDMS 1 3959 3959
and handling, High safety
ZVTV 7 2,500 5,900 Good Traction, Balanced performance Muscle
7 4,142 5,760 Resistant to cuts and abrasions, All terrain grip
Master
ZSLK 5 2,600 4,850 Excellent wet grip, Precise handling Estate N4 1 4163 4163 Excellent handling, All terrain grip
Estate N6 1 4192 4192 Excellent handling, All terrain grip
SLM 2 2,925 4,890 Good grip, Balanced performance Resistant to cuts and abrasions, High durability, High load
Bigrover 1 4590 4590
bearing capacity
Excellent cornering capabilities, Good grip, Good stability,
ZLO 16 3,150 28,000 Perfinza High Comfort, Firm grip, quick response, Great stability
High comfort 4 5,874 12,213
CLX1 and handling, High safety, Resistant to cuts and abrasions
ZQT 8 4,000 6,800 Good Traction, fuel efficient, Resistant to cuts and abrasions Wanderer SL High Comfort, Firm grip, quick response, Great stability
10 6,300 12,415
Street and handling, High safety, Resistant to cuts and abrasions
ZGT 2 4,950 5,788 High safety, High comfort, Improved handling, long tread life High Comfort, Firm grip, quick response, Great stability
Wanderer 1 7709 7709
and handling, High safety, Resistant to cuts and abrasions
ZSPORT 1 5100 5100 Excellent cornering capabilities, Excellent traction Wanderer High Comfort, Firm grip, quick response, Great stability
1 7948 7948
O/R and handling, High safety, Resistant to cuts and abrasions
Wanderer AT 7 5,200 10,200 Resistant to cuts and abrasions, Good durability High Comfort, Firm grip, quick response, Great stability
Perfinza CLY1 2 13,472 18,198
and handling, High safety, Resistant to cuts and abrasions
ZGP 5 5,200 6,625 Resistant to cuts and abrasions, All terrain grip Safari 1 n/a n/a
Total 216
Page 30
Price Price
Price Price
range – range –
range – range – Sizes Description
Sizes Description Min Max
Min Max
(Rs.) (Rs.)
(Rs.) (Rs.)
High comfort, Better cornering capabilities, Improved
B290 25 2,050 7,800
ULTIMA LXT 2 1,985 2,300 Fuel efficient, Better durability, better handling handling
Firestone FR500 24 2,350 6,150
Better handling, Low noise, Improved handling, Good wet Quite ride, High comfort, Better cornering capabilities,
Ultima NXT 8 1,950 2,530 S322 8 2,430 4,400
grip Improved handling
TURANZA AR20 23 2,500 9,500
Fuel efficient, Better cornering capabilities, Improved S248 8 2,500 4,750
Ultima Neo 5 2,150 2,700 Superior high speed stability, Efficient braking, Superior
handling TURANZA ER60 16 2,700 9,090
grip, Comfortable ride
Good grip, Improved handling, Efficient braking, Long tyre POTENZA GIII 19 2,870 9,700
Ultima XPC 5 1,977 4,000 B250 17
life 3,200 6,950 Fuel efficient, Better durability, Good grip all season,
Ecopia EP150 14 3,050 6,990 better handling
Ultima Sport 9 2,552 4,083 Good grip, Improved handling, Better cornering capabilities MY02 Sporty Superior high speed stability, Efficient braking, Superior
16 3,410 8,950
Style grip, Comfortable ride
Good Comfort, Good overall traction, Improved handling,
Vectra 11 2,594 5,500 B800 1 3600 3,600 Fuel efficient, Better durability, Good grip
Long tyre life, Quite ride
L607 5 3,700 5,170
Good Comfort, Good overall traction, Improved handling, TURANZA Excellent grip, Resistance to cuts and abrasions, Long
UX ROYALE 10 3,970 8,223 3 4,450 5,600
Long tyre life, Quite ride ER300 tread life, High load bearing capacity
Superior acceleration and braking, High speed stability, Easy POTENZA RE88 2 4,950 5,200
UX1 4 4,800 14,178
maneuvering High Comfort, Firm grip, quick response, Great stability
Elanzo Better cornering capabilities, Good overall traction, Ecopia EP100A 8 4,444 8,178 and handling, High safety, Resistant to cuts and
2 5,161 5,784 abrasions, Quiet ride
Crusero Improved handling, Long tyre life
PREMIUM CAB 6 5,300 6,700 Superior high speed stability, Efficient braking, Superior
Resistant to cuts and abrasions, High load bearing capacity,
Brute 6 5,110 6,238 B390 4 5,500 5,770 grip, Comfortable ride
All-terrain traction, Improved handling
High Comfort, Firm grip, quick response, Great stability
Excellent grip, Resistance to cuts and abrasions, Long tread DUELER D689 14 6,000 9,138 and handling, High safety, Resistant to cuts and
Brute 4x4 4 4,800 5,950
life abrasions, Quiet ride
Excellent grip, Resistance to cuts and abrasions, Long tread DUELER A/T 693 Superior high speed stability, Efficient braking, Superior
Elanzo 1 6,450 6,450 1 6500 6,500
life II grip, Comfortable ride
Good Comfort, Good overall traction, Improved handling, Ecopia EP850 6 7,195 12,660
Elanzo NXT 5 5,200 14,500 Potenza S001 17
Long tyre life, Quite ride 7,420 28,335
Elanzo Better cornering capabilities, Good overall traction, Turanza T001 11 6,100 14,815
1 4,622 4,622 Turanza ER370 1 8440 8,440
Touring Improved handling, Long tyre life
DUELER D684 2 8,670 13,060
Good Comfort, Good overall traction, Improved handling, High Comfort, Firm grip, quick response, Great stability
Ranger A/T 2 5,180 6,300 DUELER H/L 683 7 8,750 11,800
Long tyre life, Quite ride and handling, High safety, Resistant to cuts and
DUELER D687 1 9000 9,000 abrasions, Quiet ride
Good Comfort, Good overall traction, Improved handling,
Ranger H/T 7 5,180 9,820 TURANZA GR90 11 10,100 21,500
Long tyre life, Quite ride
DUELER H/P
5 11,000 26,200
Total 82 SPORT
Firestone
2 8,150 10,962
Destination LE2
Source: Industry, Spark Capital Total 277
Page 31
Min Max Min Max
(Rs.) (Rs.) (Rs.) (Rs.)
Superior high speed stability, Efficient braking, Superior grip, Fuel efficient, Improved handling, Good wet grip, long tread
Energy XM2 28 Earth 1E400 25 3,230 7,720
2,831 8,095 life
Comfortable ride
High Comfort, Firm grip, quick response, Great stability and
Superior high speed stability, Efficient braking, Superior grip, S.drive AS01 14 4,600 11,960 handling, High safety, Resistant to cuts and abrasions, Quiet
Energy XM1 1 5,200 5,200 ride
Comfortable ride
Fuel efficient, Better durability, Good grip all season, better
A.drive AA01 19 2,950 5,600
handling
Primacy 3 ST 12 5,600 14,000 High Comfort, Firm grip, quick response, Great stability and GEOLANDAR
handling, High safety, Resistant to cuts and abrasions, Quiet 7 5,100 14,220
H/ T-S
Latitude ride GEOLANDAR
6 7,150 13,625 17 5,360 15,860
Cross A/T-S
Superior high speed stability, Efficient braking, Superior grip, AVS db V550 9 5,620 17,000 High Comfort, Firm grip, quick response, Great stability and
LTX A/T 2 2 8,625 8,760
Comfortable ride handling, High safety, Resistant to cuts and abrasions, Quiet
A.drive AR01 9 7,240 9,360 ride
Latitude Tour
4 9,000 17,985 DNA db
HP 5 5,100 11,170
ES501
Primacy SUV 3 9,095 19,985 ES100 5 4,096 11,554
Pilot Sport 3 C DRIVE A539 2 3,077 3,928 Good grip all season, better handling
6 11,990 25,455
ST
C.drive AC01 5 3,800 6,222
Latitude
6 14,200 24,000 High Comfort, Firm grip, quick response, Great stability and A348 1
Sport 3 8630 8630
handling, High safety, Resistant to cuts and abrasions, Quiet
PILOT ride E70B DB 1 12080 12080
2 12,141 16,000
PRECEDA PP2
ADVAN Sport 10 13,479 29,193 High Comfort, Firm grip, quick response, Great stability and
PRIMACY HP 2 17,400 17,500 handling, High safety, Resistant to cuts and abrasions, Quiet
Advan Sport
2 14,600 18,780 ride
V105
Geolandar
Pilot Sport 4 6 8,470 24,290 2 15690 15690
M/T+
Geolandar
18 n/a n/a
LTX Force 7 8,780 13,465 A/T G015
BluEarth
11 n/a n/a
AE50
Total 85
Total 162
Page 32
Industry Capex
Gross block (domestic) of Indian tyre players indexed to FY08 stood at 312 in FY17; expected to grow to 460 by
FY20E
Apollo and CEAT to lead the bulk of the capacity additions through FY20E. JK to see minimal capacity additions
(on the back of its recent acquisition of Cavendish)
CFO to Capex (%) for Apollo and CEAT to be the highest through FY20E, amongst peers
Page 33
Industry wide capacity additions through FY20E
Expect capacity additions through FY18-FY20E to be led by Apollo and CEAT
Expect FY18-FY20 to see cumulative additions of ~150 points to the domestic tyre capacity gross block index (indexed to 2008)
460%
Cumulative additions to gross block indexed to FY08(%) 411%
356%
312%
254% 258%
220% 235%
182%
162%
129%
100% 111%
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Note: For the above, we have considered only the gross block of the standalone operations of Apollo, JK Tyres, MRF, CEAT and TVS Tyres
Apollo and CEAT to lead the bulk of the capacity additions through FY20E. JK to see minimal capacity additions (on the back of its recent acquisition of Cavendish’s facilities)
FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Cumulative additions to gross block indexed to FY08(%)

187%
247%
251%
279%
314%
343%
456%
536%
644%
721%
411%
437%
464%
526%
624%
752%
862%
939%
174%
178%
190%
171%
219%
264%
338%
408%
309%
256%
328%
382%
438%
496%
129%
173%
190%
242%
236%
243%
249%
256%
161%
208%
224%
281%
382%
389%
396%
403%
230%
238%
351%
315%
475%
514%
561%
616%
306%
484%
182%
267%
179%
217%
291%
APTY (Standalone) APTY (Consol) CEAT MRF JK Tyres (Standalone) JK Tyres (Consol) TVS Tyres
▪ Greenfield expansion ▪ Greenfield expansion ▪ Expect continued
▪ Conclusion of greenfield capex at Hungary (PCR) and
of 2W + PCR + TBR of across segments at ▪ With spare capacities available at Cavendish, do not expansion of facilities
brownfield capex at Chennai (PCR+TBR)
capacities spanning Gujarat beginning foresee any major capex spends in line with
▪ Commencement of spends on greenfield plant at AP
through FY22E FY18 competition
Page 34
APTY and JK (which acquired Cavendish) saw meaningful capex spends as % of revenue in FY17
Besides heavy capex spends by APTY and JK, capex as % of CFO for the domestic tyre Industry registered a spike also on the back of inventory stocking across companies
(fearing further rise in rubber prices)….expect p.a. capex to CFO intensity for the industry to taper down through FY20E
136.5%
120.3%
65.0%
56.9% 58.6% 54.2%
39.8%
26.7%
5.8%
Capex as % of CFO - Domestic Tyre Industry
Expect Apollo (Hungary/Chennai and AP) and CEAT (greenfield/brownfield operations across locations) to expend significant accruals on capex through FY20E
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Capex as % of CFO
148%
138%
137%
135%
134%
123%
132%
107%
110%
92%
86%
86%
82%
72%
68%
1374%
1391%
56%
60%
48%
46%
42%
472%
368%
108%
266%
434%
28%
24%
24%
20%
15%
12%
12%
29%
18%
29%
39%
30%
45%
76%
27%
35%
26%
77%
49%
-18%
-7%
-25%
▪ Greenfield expansion ▪ Greenfield expansion ▪ Expect continued

▪ Conclusion of greenfield capex at Hungary (PCR) and
of 2W + PCR + TBR of across segments at ▪ With spare capacities available at Cavendish, do not expansion of facilities
brownfield capex at Chennai (PCR+TBR)
capacities spanning Gujarat beginning foresee any major capex spends in line with
▪ Commencement of spends on Greenfield plant at AP
through FY22E FY18 competition
Page 35
MRF’s measured capex to ensure limited impact on RoCEs; fixed asset turnover ratio to continue to remain healthy
Expect MRF (despite expected to incur Rs. 32 bn of capex through FY20E, including a greenfield capex in Gujarat) to exhibit high RoCE’s through FY20E
23%
22%
19%
16%
15%
15%
15%
14%
13%
13%
12%
12%
12%
12%
11%
11%
11%
11%
11%
10%
10%
10%
10%
10%
9%
8%
7%
5%
15%
14%
16%
20%
19%
18%
18%
16%
19%
18%
17%
33%
11%
14%
11%
11%
13%
18%
25%
38%
9%
Expect MRF to continue to enjoy strong FATO through FY20E. CEAT’s FATO is comparable to MRF despite resorting to outsourcing. TVS tyres enjoys the best turnover ratios on
the back of its 2W tyres (only) portfolio
Highest FATO
With significant capacities having recently CEAT has a robust FATO, MRF enjoys high fixed asset The acquisition of Cavendish being focussed
come on-stream at Chennai and Hungary comparable to MRF. However, turnover ratio (despite ~45% of and the gradual ramp up of its only on 2W tyres
(Greenfield), coupled with fresh greenfield the same is aided by revenue from T&B segment) utilisation is expected to
capex plans (AP), APTY’s FATO is expected to outsourcing of bulk of 2W depress FATO
remain muted through FY20E production
3.4
2.2
2.0
1.9
1.9
1.3
1.1
1.0
1.1
1.2
4.5
3.9
3.4
3.5
3.5
2.0
1.2
1.5
2.5
2.3
1.9
1.8
1.7
1.4
1.3
1.2
1.6
1.5
1.4
1.2
1.2
1.1
1.1
1.1
2.2
2.3
2.4
2.5
2.4
2.1
1.9
1.7
2.7
2.7
2.3
2.2
2.0
1.7
1.6
1.5
1.3
1.2
1.3
1.3
1.4
2.0
1.8
1.7
1.6
5.2
5.0
5.0
4.6
Source: Company, Spark Capital
Page 36
Common Sized P&L
MRF’s delta in gross margin relative to peers, is further enhanced by lower ‘other expenses’ translating into
superior EBITDA margin
Page 37
Common Sized P&L – Comparison across major domestic players
MRF’s delta in gross margin relative to peers, is further enhanced by lower ‘other expenses’ translating into best in class EBITDA margin
MRF (Standalone) CEAT (Standalone) TVS Tyres
Common Sized P&L
(%)
FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17
Operating Revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Gross Margin 29.6 34.9 36.5 43.7 43.4 30.8 35.3 38.4 43.4 40.8 31.5 33.9 40.7 46.0 44.5
Employee Costs 4.3 5.0 5.6 6.3 7.4 5.5 5.5 6.4 6.8 6.7 7.6 7.3 8.2 9.6 10.6
Other expenses 14.7 15.3 16.3 15.4 16.4 17.3 18.5 20.6 22.3 22.7 18.2 19.3 21.6 19.6 19.4
EBITDA 10.6 14.6 14.6 22.0 19.6 8.0 11.2 11.3 14.3 11.3 5.8 7.3 10.9 16.8 14.5
Depreciation 2.5% 3.1 3.2 3.7 4.6 1.6 1.5 1.6 2.0 2.5 1.6 1.4 2.1 2.2 2.8
EBIT 8.1 11.5 11.4 18.3 15.0 6.4 9.7 9.8 12.4 8.9 4.1 5.9 8.8 14.6 11.7
PAT 4.8 6.6 6.8 12.4 11.0 2.2 4.7 5.4 8.2 6.4 2.4 2.8 5.5 10.2 7.9
JK (Consol) Apollo (Standalone) Apollo (Consol)
Common Sized P&L
(%)
FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17
Operating Revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Gross Margin 30.8 36.1 38.1 43.9 43.5 28.1 32.7 36.6 43.0 41.6 37.5 42.1 44.8 49.7 47.7
Employee Costs 8.5 9.9 9.9 11.4 11.6 5.0 5.6 6.4 6.5 6.6 11.5 12.0 12.7 13.3 13.2
Other expenses 13.6 15.6 16.2 16.6 17.7 12.6 14.5 15.5 18.6 20.1 14.6 16.0 17.0 19.6 20.5
EBITDA 8.8 10.6 12.0 16.0 14.2 10.6 12.6 14.7 17.9 14.9 11.4 14.0 15.1 16.8 14.0
Depreciation 1.9 2.3 2.1 3.1 3.8 2.6 2.8 2.8 3.0 3.2 3.1 3.1 3.0 3.6 3.5
EBIT 6.9 8.3 9.8 12.9 10.4 8.0 9.8 12.0 14.9 11.6 8.3 10.9 12.1 13.2 10.5
PAT 2.8 3.3 4.4 6.6 4.9 3.7 5.4 7.2 11.4 9.0 4.7 7.2 7.6 9.5 8.3
Source: Company, Spark Capital Page 38

Comparison of Gross Margin
MRF, with a preponderance of non-truck revenue (lower % of replacement demand), enjoys comparable margins to Apollo Standalone,
which derives ~65% of standalone revenue from T&B segment (highest proportion of replacement demand)
Gross Margin profile – MRF and CEAT’s gross margin aided by its rounded portfolio
44.8%
40.8%
32.2%
43.9%
23.6%
28.1%
32.7%
36.6%
43.0%
41.6%
33.9%
37.5%
42.1%
49.7%
47.7%
25.3%
30.8%
35.3%
38.4%
43.4%
27.1%
29.6%
34.9%
36.5%
43.7%
43.4%
22.4%
28.9%
35.5%
42.3%
38.2%
24.1%
30.8%
36.1%
38.1%
43.5%
32.8%
31.5%
33.9%
40.7%
46.0%
44.5%
▪ Apollo’s gross margins are aided by the relatively

▪ Despite a T&B heavy revenue mix like Apollo, JK’s
higher share of its revenue from the more profitable ▪ TVS derives >90% of its
▪ CEAT and MRF enjoy rounded portfolios, spread margins are significantly lower.
replacement market due to 1) higher share of T&B in revenue from the 2W–
across the T&B, PCR and 2W tyre segments, aiding ▪ This is led by a higher mix of OEMs in end-user
its domestic revenue mix and 2) its European the most profitable
margins. segment (as opposed to replacement) compared to
operations (currently) cater only to the replacement segment amongst all.
Apollo (in whose case it is the converse)
PCR segment
FY12 FY13 FY14 FY15 FY16 FY17
Revenue mix by segment Revenue mix by end-use market
77%
63%
56%
34%
29.0%
23% 23%
18.0%
13.0%
13.0%
14.0%
14%
10.0%
90-95%
10%
8.0%
41.0%
44.0%
17.0%
33.0%
39.0%
67.0%
15.0%
12.0%
0.0%
3.0%
7.0%
5.0%
6.0%
0.0%
0.0%
4.0%
2.0%
0%
CEAT APTY (Consolidated) JK Tyres (Consolidated)

MRF CEAT Apollo (C) JK Tyres (C) TVS Tyres
T&B PCR LCV 2W Farm and OTR Others OEM Replacement Exports
Page 39
Raw material prices
Synthetic rubber stocks have seen a consistent deficit scenario over the last 5 quarters; would be a key monitorable going forward
Global demand and supply scenario of natural and synthetic rubber
2014 2015 2016 2017
('000 tonnes)
Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2
NATURAL RUBBER PRODUCTION
Asia-Pacific 11,236 2,610 2,411 3,106 3,219 11340 2593 2473 3157 3247 11470 11470 2899
EMEA 564 153 125 155 166 597 159 137 174 175 645 645 186
Americas 335 92 98 69 75 334 89 99 69 79 336 336 100
TOTAL 12,136 2,855 2,634 3,330 3,460 12271 2841 2709 3401 3500 12451 12451 3185
NATURAL RUBBER CONSUMPTION
Asia-Pacific 8,916 2,111 2,307 2,278 2,145 8835 2182 2350 2344 2339 9215 9215 2296
EMEA 1,553 392 399 431 376 1597 420 432 414 398 1663 1663 434
Americas 1,712 430 468 427 384 1709 412 463 412 421 1709 1709 428
TOTAL 12,181 2,932 3,174 3,135 2,905 12140 3013 3245 3170 3158 12587 12587 3158
WORLD NR SUPPLY-DEMAND SURPLUS/DEFICIT (45) (77) (540) 194 555 130 -173 -536 231 343 -135 -135 27
SYNTHETIC RUBBER PRODUCTION
Asia-Pacific 7,321 1,817 1,849 1,861 1,868 7508 1894 1886 1912 1974 7666 7666 1965
EMEA 3,887 1,005 1,056 940 985 3914 1043 1086 1000 1001 4130 4130 1094
Americas 2,970 750 784 759 786 3085 753 757 742 784 3036 3036 795
TOTAL 14,179 3,572 3,690 3,560 3,639 14507 3690 3728 3654 3759 14831 14831 3854
SYNTHETIC RUBBER CONSUMPTION
Asia-Pacific 7,800 1,933 2,033 1,985 1,894 7939 1978 2087 2033 2135 8233 8233 2161
EMEA 3,537 906 945 883 914 3633 918 954 913 893 3677 3677 989
Americas 2,930 734 775 765 795 3077 767 742 745 782 3035 3035 765
TOTAL 14,267 3,572 3,754 3,633 3,602 14650 3663 3783 3690 3810 14946 14946 3915
WORLD SR SUPPLY-DEMAND SURPLUS/DEFICIT (88) - (64) (73) 37 -143 27 -54 -36 -51 -114 -114 -61
% SR IN TOTAL RUBBER CONSUMPTION 54 55 54 54 55 54.7 54.9 53.8 53.8 54.7 54.3 54.3 55.4
Source: IRSG, Spark Capital
The deficit scenario in 260
synthetic rubber
210
could have an impact
on natural rubber 160
prices as well
110
These will be key
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1HFY18
monitorables going
forward Synthetic Rubber (Rs./kg) Natural Rubber - RSS 4 (Rs/kg)
Page 40
Other operating expenses and EBITDA margin
MRF’s EBITDA margin leads its peers by a distance; CEAT with greater focus on the 2W and PCR segments, should continue to witness a
structural uptick in margin going forward
Robust gross margin and lower other expenses compared to peers has leads to higher EBITDA margin for MRF compared to peers
3%
3%
2%
2%
10%
11%
12%
11%
6%
9%
9%
9%
9%
9%
6%
6%
6%
7%
6%
6%
6%
7%
7%
7%
8%
6%
7%
6%
6%
2%
5%
6%
6%
5%
6%
2%
5%
4%
5%
5%
5%
7%
6%
7%
5%
5%
6%
7%
7%
7%
8%
7%
8%
7%
4%
7%
5%
9%
3%
4%
7%
5%
7%
4%
5%
4%
6%
4%
7%
4%
6%
7%
FY 14 FY 15 FY16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17
MRF Apollo Tyres (S) Apollo Tyres (C) CEAT Tyres TVS Tyres JK Tyres Consol
Mfg. related other expenses Selling and Distribution expenses Misc. Other expenses
Robust gross margin and lower other expenses compared to peers has leads to higher EBITDA margin for MRF compared to peers
14.9%
14.0%
11.3%
19.6%
14.2%
14.5%
11%
13%
15%
18%
10%
11%
14%
15%
17%
11%
11%
14%
11%
15%
15%
22%
11%
12%
16%
11%
17%
8%
6%
8%
8%
3%
9%
9%
6%
7%
APTY (Standalone) APTY (Consol) CEAT MRF JK Tyres (Consol) TVS Tyres
Page 41
Net Block as % of capital employed and cash conversion days
CEAT has the highest net block as % of capital employed, also led by its lower than industry cash conversion days cycle
Net block as % of capital employed
54.6%
59.4%
54.8%
73.3%
49.2%
58.4%
70.5%
64%
66%
67%
80%
80%
54%
59%
73%
63%
64%
70%
65%
56%
70%
73%
64%
68%
64%
58%
62%
67%
75%
65%
59%
72%
76%
79%
49%
61%
52%
48%
48%
44%
40%
56%
69%
66%
74%
58%
55%
51%
61%
71%
67%
58%
73%
73%
70%
36%
43%
43%
53%
61%
51%
45%
38%
Cash conversion days (Debtors + Inventory – Trade Payable)

18.4
42.2
28.9
34.1
26.2
34.4
54.2
57.5
50.5
53.5
14.0
26.0
57.0
54.8
58.6
53.0
16.4
51.7
48.2
40.6
11.4
42.9
38.0
64.0
28.8
42.8
26.3
7
2.2
25
18
19
44
46
57
10
21
44
66
43
65
44
Page 42
Return Ratios
JK’s RoEs are optically higher on the back of its debt laden balance sheet; MRF and TVS Tyres enjoy the best RoCEs
RoE% - With significant debt contracted for the recent acquisition, JK’s RoE metrics look healthy
12%
23%
20%
43%
19%
21%
25%
16%
11%
13%
24%
20%
19%
16%
10%
13%
14%
30%
25%
17%
13%
15%
14%
25%
22%
42%
18%
14%
17%
16%
17%
26%
34%
21%
13%
19%
26%
26%
29%
20%
22%
27%
25%
57%
31%
19%
24%
24%
3%
APTY (Standalone) APTY (Consol) CEAT MRF JK Tyres (Standalone) JK Tyres (Consol)
MRF and TVS enjoy the highest RoCEs on the back of better profitability and higher asset turns
11%
11%
15%
14%
16%
20%
12%
11%
11%
19%
18%
15%
10%
11%
18%
16%
19%
14%
12%
12%
18%
17%
33%
16%
13%
15%
15%
11%
14%
10%
10%
12%
11%
11%
13%
10%
10%
13%
18%
25%
38%
23%
19%
22%
9%
7%
9%
8%
5%
Page 43
Initiating Coverage – CEAT Tyres – ADD (TP of Rs. 1,950)
Page 44
CMP 1Y Target Rating
CEAT TYRES Rs. 1,775 Rs. 1,950 ADD
Company Background
Corporate Factsheet
▪ CEAT International was established in 1924 in Turin (Italy) for manufacturing cables for telephones and railways. It commenced its operations in India in 1958 as CEAT Tyres
of India Limited, which was renamed as CEAT Limited in 1990. CEAT became part of the RPG group in 1958. The RPG Group operates in various industries-Infrastructure,
Company Background
Technology, Life Sciences, Plantations and Tyre Manufacturing. CEAT is amongst India’s leading tyre company with revenue of close to $1bn. CEAT manufactures tyres for
applications across the spectrum – T&B, PCR, 2W/3W, Speciality and OTR tyres
▪ Company has four subsidiaries 1) CEAT Specialty Tyres Limited (WoS, manufacturing of OTR tyres). 2) Rado Tyres Limited (58% Subsidiary), manufactures 2/3W tyres at
Cochin and supplies its entire production to CEAT 3) ACHL, the Company’s investment arm in Sri Lanka, has a 50:50 joint venture company viz. CEAT-Kelani Holdings Private
Group companies Limited, which operates four manufacturing plants through its wholly owned subsidiaries in Sri Lanka.4) CEAT AKKhan Limited, a 70:30 joint venture (JV) in Bangladesh. CAL
is setting up a green field facility for manufacture of automotive bias tyres in Bangladesh. CAL has been selling CEAT branded automotive tyres, sourced from CEAT in the
local market since the last 3 (three) years.
▪ Mr. Harsh Vardhan Goenka, Chairman and Non Executive Director- Graduated in Economics from St.Xavier's College thereafter pursued his MBA from the International
Institute for Management Development (IMD) Switzerland. He became the Managing Director of CEAT in 1983, at the age of 24. He is also the Chairman of the Board of
RPG Enterprises
▪ Mr. Anant Vardhan Goenka, Managing Director- M.B.A. from the Kellogg School of Management and a B.SC in Economics from the Wharton School. Mr. Goenka joined
KEC International Limited (KEC) in 2007 and led the supply chain, manufacturing, procurement and telecom business. He joined the Company as Deputy Managing Director
Management depth in 2010 and became Managing Director in the year 2012.
▪ Mr. Kumar Subbiah, CFO - Diversified and rich experience in Finance & Commercial functions covering India, Asia region and Global leadership roles spanning over 20
years with Unilever/ Hindustan Unilever & 2 years with Ceat
▪ Mr. Arnab Banerjee, Executive Director -Operations, Mr. Banerjee is an alumnus of IIT Kharagpur, IIM Calcutta and Harvard Business School. At CEAT, he handles
operations including sales & marketing (domestic aftermarket, OEMs and exports), manufacturing (4 plants), Quality Assurance, Digital initiatives and integrated supply
chain.
Products and category
▪ In FY17, CEAT derived ~33%,~30% and ~26% of its revenue from the T&B, 2/3w and PCLT segments
wise revenue
▪ In FY17, CEAT derived ~63%,23% and ~14% of its revenue from the replacement, OE and export markets.
Revenue mix
▪ In the replacement segment, it has a network of 4,500+dealers,490+exclusive CEAT franchisees
▪ CEAT has 6 manufacturing facilities – Bhandup (Mumbai), Nasik, Halol, Nagpur, Ambernath (all in Maharashtra), Halol & in Sri Lanka (through a 50:50 JV, named CEAT
Manufacturing Kelani Holdings Company (Private) Limited).
Facilities ▪ CEAT meets close to two-thirds of its production through in-house plants and secures the rest from various outsourcing partners on conversion cost basis and bought-out
basis.
Corporate Bankers ▪ Bank of India, Bank of Baroda, State Bank of India, ICICI Bank, IDBI Bank, Corporation Bank, Yes Bank, HSBC, Standard Chartered Bank and Kotak Mahindra Bank
Auditors ▪ S R Batliboi & Co. LLP (Since FY13)

Page 45
CEAT’s strategic focus areas for growth Rs. 1,775 Rs. 1,950 ADD
CEAT has identified, importantly, the PCR and 2W segments as key focus areas of growth
Revenue contribution from the strategic focus areas has consistently increased over the years
• CEAT’s strategic focus areas include PCR, 2W, Specialty tyre

exports & emerging markets. Importantly, T&B segment
57% 54% 50%
68% 61% does not figure in the list of CEAT’s key focus areas
80%
• These focus area segments being relatively profitable than
the T&B segment, have resulted in margin improvement
43% 46% 50% over recent years
32% 39%
20% • Importantly, CEAT’s market share in these segments is also
growing strongly
FY10 FY14 FY15 FY16 FY17 1HFY18
Strategic Focus Areas Others
Revenue Breakdown by Segment and End-User market – As the contribution of the PCR and 2W segments in overall revenue has been rising, the share of the replacement
segment has been on the decline.
5% 7% 8% 7% 6% 6% 5% 5% 4%
8% 4% 7% 6% 7% 8% 17% 18% 18% 14% 14% 12%
7% 7% 8% 23% 23% 20%
10% 10% 13% 13% 13% 12%
10% 14% 14% 10%
11% 13% 23% 23% 26%
11% 13% 16% 22% 21%
5% 8% 11% 17% 20%
22% 27% 29% 32%
6% 7%
9% 10% 11%
13% 14% 73% 69% 63% 63% 62%
61% 60% 56% 54% 61% 57% 58% 61%
46% 42% 38% 33% 30%
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1HFY18 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1HFY18
T&B PCR 2/3 wheelers LCV Farm Speciality Replacement OEM Export
Page 46
CEAT’s strategic focus areas for growth Rs. 1,775 Rs. 1,950 ADD
In keeping with CEAT’s enhanced focus, revenue from the 2W and PCR segment have grown strongly
CEAT’s 2W and PCR segments have seen strong revenue growth, while the T&B segment has seen a revenue decline
16480 7430
26,358
14830 25,038 24,632
6190 23,405
12460 5610 20,729
4760 18,816
8990 9310 4230
3760
6390 2840
5250 8,889
FY12 FY13 FY14 FY15 FY16 FY17 1HFY18 FY12 FY13 FY14 FY15 FY16 FY17 1HFY18 FY12 FY13 FY14 FY15 FY16 FY17 1HFY18
2/3W Revenue (Rs. Mn) PCR Revenue (Rs. Mn) T&B Revenue (Rs. Mn)
CEAT now enjoys sizeable market share in the 2W and PCR space; it aims to keep its share in the T&B space at similar levels
PCR market shares T&B Segment

2W/3W market shares
CEAT, ~10%- Other
Others, Players, 8%-
12%
~10% Imports, 9%- 10%
12% Apollo, 25%
CEAT, 25-
30% Others (incl CEAT , 10%-
MRF, ~~25-
TVS Tyres, Bridgestone) 12%
27%
25-30% , ~35%
JK Tyres,
MRF, ~33- JK Tyres, 23%-26%
MRF, 23-
Apollo, ~10-12%
35% 25%
~17%
Page 47
Margin Profile Rs. 1,775 Rs. 1,950 ADD
Margin improvement linked to proportion of 2W and PCR revenue
In keeping with the increased revenue share from the more profitable 2W and PCR segments, CEAT’s overall gross margin have seen an uptick
43.4% 204 43.4%

40.8% 210 45.0%
38.4% 200 40.8% 43.0%
36.4% 190 41.0%
35.3% 178 38.4%
32.0% 180 166 36.4% 39.0%
30.8% 38.0% 170 37.0%
26.0% 160 35.0%
25.3% 35.3%
150 30.8% 136 33.0%
140 130 130 31.0%
19.0% 19.0% 18.0% 130 29.0%
16.0% 115
120 25.3% 27.0%
110 25.0%
FY12 FY13 FY14 FY15 FY16 FY17 1HFY18 FY12 FY13 FY14 FY15 FY16 FY17 1HFY18
Revenue contribution of 2W and PCR Gross Margin (%) Rubber prices (Rs/kg) Gross Margin (%)
Gross Margin profile –CEAT’s gross margin is aided by its rounded portfolio leaning towards 2W and PCR
23.6%
28.1%
32.7%
36.6%
43.0%
41.6%
33.9%
37.5%
42.1%
44.8%
49.7%
47.7%
25.3%
30.8%
35.3%
38.4%
43.4%
40.8%
27.1%
29.6%
34.9%
36.5%
43.7%
43.4%
22.4%
28.9%
32.2%
35.5%
42.3%
38.2%
24.1%
30.8%
36.1%
38.1%
43.9%
43.5%
32.8%
31.5%
33.9%
40.7%
46.0%
44.5%
▪ Apollo’s gross margins are aided by the relatively

▪ Despite a T&B heavy revenue mix like Apollo, JK’s
higher share of its revenue from the more profitable ▪ TVS derives >90% of its
▪ CEAT and MRF enjoy rounded portfolios, spread margins are significantly lower.
replacement market due to 1) higher share of T&B in revenue from the 2W–
across the T&B, PCR and 2W tyre segments, aiding ▪ This is led by a higher mix of OEMs in end-user
its domestic revenue mix and 2) its European the most profitable
margins. segment (as opposed to replacement) compared to
operations cater only to the replacement PCR segment amongst all.
Apollo (in whose case it is the converse)
segment

Page 48
A&P spends and Distribution network Rs. 1,775 Rs. 1,950 ADD
CEAT’s spending on A&P ranges in the top end of the spectrum amongst peers; it has consistently enhanced its distribution network in recent
years
In keeping with the shift in the portfolio towards PCR and 2W segments (B2C), CEAT has enhanced its sales and distribution network considerably over the past few years
4500 4500 310

586 601 601 290
4000
3500
464 219
176
212 102
390 450 490
FY12 FY15 FY16 FY17 1HFY18

FY15 FY16 FY17 1HFY18 FY12 FY15 FY16 FY17 1HFY18
No. of CEAT Shoppes
Dealers Exclusive CEAT Franchisees District Coverage
CEAT’s S&D spends have increased over the years with the increased focus on non Truck businesses
7.9%
7.1% 7.2%
6.7% 6.8% 6.6% 6.7% 6.5% 6.6%
6.2% 5.9% 6.0% 5.9%
5.8% 5.7% 5.7% 5.6%
5.4% 5.2% 5.2% 5.3%
4.8% 4.6%
3.9%
FY 14 FY 15 FY16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17 FY 14 FY 15 FY 16 FY 17
MRF Apollo Tyres (S) Apollo Tyres (C) CEAT Tyres JK Tyres ST JK Tyres Consol
Selling and Distribution expenses
Page 49
CEAT enjoys a vast product range across segments Rs. 1,775 Rs. 1,950 ADD
T&B Segment 2W Segment PCR Segment
Bridgestone and MRF have strong offerings in the
Apollo towers over the rest in range of T&B tyres CEAT and MRF have a wide of offerings in 2W
PCR segment
60 Across 29 categories Across 26 categories 162 Across 18 categories

107
55 Across 30 categories Across 47 categories 85 Across 13 categories

140
277 Across 29 categories

161 Across 47 categories 97 Across 53categories
54
216 Across 40categories
97 Across 12categories
No. of Sizes No. of Sizes No. of sizes
Source Industry, Spark Capital
Page 50
Working Capital Management and Cash flows Rs. 1,775 Rs. 1,950 ADD
CEAT enjoys healthy working capital levels and EBITDA to cash flow conversion metrics
CEAT enjoys the best cash conversion days amongst peers…
Cash Conversion Days
26.0
42.8
28.9
34.1
26.2
34.4
54.2
57.5
50.5
53.5
14.0
18.4
57.0
54.8
58.6
53.0
16.4
51.7
48.2
40.6
11.4
42.9
42.2
38.0
64.0
28.8
26.3
7
2.2
19
44
46
57
10
21
25
44
66
43
65
18
44
…also, the EBITDA to OCF conversion % has remained robust over the years
125.7% 127.0%
116.1% 113.1%
97.6% 97.5%
66.7%
56.9%
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Page 51
Significant capex plans on the anvil Rs. 1,775 Rs. 1,950 ADD
In Dec 16, CEAT announced a capex plan involving an outlay of Rs. 28bn through FY22. The capex (detailed below) involves setting up capacities
across the TBR, PCR and 2W segments (including a Greenfield plant at Chennai)
Current Capacities Current Utilisation levels Capex plans Outlay

▪ Setting up a 120 TPD plant at Nagpur.
▪ CEAT outsources majority of its 2W/3W ▪ As at Sep 17, this has been scaled up to
▪ 270 TPD (including 70 requirements. Hence, the utilisation of 70TPD. ▪ Outlay on the partially commissioned
TPD from the partial the older facility of 200 TPD varies, ▪ Expect the plant top be fully scaled up by 120 TPD plant : Rs. 4.5bn (majority of
2W/3W scale up of recent accordingly to the quantum of 1HFY19. spends have been concluded)
capacity expansion at outsourcing. ▪ Additionally, a greenfield capacity is ▪ Expected outlay on the 140 TPD
Nagpur) ▪ The partially scaled up capacity of 70 being set up in Nagpur with capacities of greenfield plant at Nagpur – Rs. 4.5bn
TPD is being utilised at less than 70% 140 TPD. Expected to be commissioned
by FY22
▪ Setting up a 120 TPD plant at Halol.
▪ As at Sep 17, this has been scaled up to
▪ ~150 TPD (including 75TPD. ▪ Outlay on the partially commissioned
~75 TPD from the 120 TPD plant : Rs. 4.5bn (majority of
partial scale up of ▪ 80-85% utilisation levels as at Sep 17. ▪ Expect the plant top be fully scaled up by
PCR 1HFY19. spends have been concluded)
recent capacity
▪ Additionally, a greenfield capacity is ▪ Expected outlay on the 150 TPD
expansion at phase II
being set up in Chennai with capacities greenfield plant at Chennai Rs. 14bn
at Halol)
of 150 TPD. Expected to be
commissioned by FY22
▪ TBB capacities of ▪ TBB utilisation at ~80% as at Sep17.
▪ Setting up a 200 TPD TBR plant at Halol.
240TPD ▪ TBR capacities are utilised at close to full
T&B ▪ Expect the plant to be commissioned in ▪ Outlay on the 200 TPD plant : Rs. 10bn
▪ TBR capacities of 80 levels as at Sep 17.
by FY22
TPD
▪ n/a.
▪ Operations have recently concluded the ▪ Capex spends for 40 TPD is ~Rs. 3.3bn.
▪ 40TPD (CEAT
OHT/Farm testing phase and facilities are expected ▪ Expect the facilities to be enhanced to n/a
Specialty Tyres)
to be ramped up over the next few 100 TPD
quarters
Page 52
Despite the humongous capex, CEAT’s balance sheet is not expected to deteriorate
Gross Block indexed to 2008: CEAT’s upcoming capex plan to be unprecedented in Gross Block indexed to 2008: CEAT’s upcoming capex plan to be unprecedented in
magnitude in its history magnitude in its history
408%
2.4 2.5 2.5 2.4
2.3 2.2 2.2 2.3
338% 2.1
2.0 1.9 1.9
264% 1.7
219%
174% 178% 182% 190%
171%
155%
100% 102% 103%
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Gross Block indexed to 2008 Fixed Asset T/o
Expect most of the incremental accruals through FY20E to be invested for the Expect the leverage ratios to remain under check despite the capex
expansion
137.8% 1.86
124.3%
99.0%
90.5% 1.25
1.08
34.7%
27.5%
11.2% 0.40
0.38
0.30 0.30 0.30
0.21
-25.2%
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Capex as % of CFO Net Debt to Equity

Page 53
While free cash flows are expected to weaken, CEAT’s return ratios are expected to recover through FY20E, led by demand pick-up
CEAT’s return ratios Free cash flows are expected to be weak through FY20E
29.7% 8,949
25.1%
23.3%
4,100 4,388
17.0% 16.8% 16.2%
15.2%
12.7% 1,716
19.4%
17.6% 580
16.2% 89
14.1% 13.6% 13.2%
12.5%
10.9%
1.2%
8.4%
-1,123
-1,972 -1,758
RoCE (%) RoE (%)
Free Cash Flows (Rs. Mn)
Page 54
CEAT’s investments in Group Entities Rs. 1,775 Rs. 1,950 ADD
Snapshot of Group Entities

Investments in Group Entities (Rs. Mn) Holding (%) FY15 FY16 FY17
Investment in Equity Instruments of Subsidiaries
Associated CEAT Holdings Company (Pvt) Limited 100% 436 436 436
CEAT AKKHAN Limited 70% 372 372 372
Rado Tyres Limited 59% 1 1 1
CEAT Speciality Tyres Limited 100% 1,101 1,101 1,101
Sub-Total - 1,909 1,909 1,909
Sub-Total 436 436 436
Investment in Equity Instruments of other entities
Maestro Comtrade Private Limited Subsidiary 0 0 0
Sub-Total 0 0 0
Investments in Preference Shares
Rado Tyres Limited - 35 35
Sub-Total - 35 35
Grand Total 1,909 1,944 1,944
CEAT Speciality Tyres Limited

CEAT Specialty Tyres Limited (CSTL is engaged in manufacturing off-the-road vehicles/ equipment tyres. Towards this, it plans to set up a green field project with an initial
capacity of 40 MT/day, which would subsequently be ramped up to 100 MT/day
Associated CEAT Holdings Company (Pvt) Limited

ACHL, the Company’s investment arm in Sri Lanka, has a 50:50 joint venture company viz. CEAT-Kelani Holdings Private Limited, which operates four manufacturing plants
through its wholly owned subsidiaries in Sri Lanka.
CEAT AKKHAN Limited

CEAT AKKhan Limited, a 70:30 joint venture (JV) in Bangladesh. CAL is setting up a green field facility for manufacture of automotive bias tyres in Bangladesh. CAL has been
selling CEAT branded automotive tyres, sourced from CEAT in the local market since the last 3 (three) years.
Rado Tyres Limited
Rado Tyres Limited (59% Subsidiary), manufactures 2/3W tyres at Cochin and supplies its entire production to CEAT
Page 55
CEAT’s investments in Group Entities Rs. 1,775 Rs. 1,950 ADD
Snapshot of Group Entities

Associated CEAT Holdings Company
Ceat Specialty Tyres Ltd FY15 FY16 FY17 FY15 FY16 FY17
Pvt Ltd
Equity Subscribed (A) 1 101 111 Equity Subscribed (A) 47 45 43
Reserves (B) -3 776 810 Reserves (B) 1,114 1,316 1,357
Net Book Value (A+B) -3 877 921 Net Book Value (A+B) 1,161 1,361 1,399
Sales Turnover 0 1022 2239 Sales Turnover 2,205 2,162 -
Profit After Tax -3 -121 -100 Profit After Tax 353 366 284
Rado Tyres Ltd FY15 FY16 FY17 Ceat AKKhan Ltd FY15 FY16 FY17
Equity Subscribed (A) 64 99 64 Equity Subscribed (A) 1,208 1,269 1,216
Reserves (B) -33 -45 -58 Reserves (B) -162 -221 -254
Net Book Value (A+B) 32 54 7 Net Book Value (A+B) 1,045 1,048 962
Sales Turnover 115 119 88 Sales Turnover 443 550 554
Profit After Tax -2 -12 -12 Profit After Tax -105 -44 -47
Page 56
0
2
4
8
6
10
12
14
0
2
4
8
6
10
12
14
16
18
Mar-07 Sep-08
Aug-07 Feb-09
Jan-08 Jul-09
Jun-08
Dec-09
Nov-08
May-10
Apr-09
Oct-10 MRF PE
Relative Valuations
Sep-09
JK Tyres PE
Source Bloomberg, Spark Capital

Feb-10 Mar-11
MRF – One Year forward PE
Jul-10 Aug-11
JK Tyres – One Year forward PE

Dec-10 Jan-12
May-11
Jun-12
Oct-11
Avg
Avg
Nov-12
Mar-12
Apr-13
Aug-12
Jan-13 Sep-13
Jun-13 Feb-14
Nov-13 Jul-14
+1sd
+1sd
Apr-14 Dec-14
Sep-14
May-15
Feb-15
Oct-15
Jul-15
Mar-16
Dec-15
May-16 Aug-16
-1sd
-1sd
Oct-16 Jan-17
Mar-17
4.5
Jun-17
6.6
2.3
Aug-17 Nov-17
6.8
9.5
12.3
0
2
4
6
8
10
12
14
16
18
20
0.0
2.0
4.0
6.0
8.0
10.0
12.0
16.0
14.0
Dec-06
Mar-06
May-07
Aug-06
Oct-07
Jan-07
Mar-08
CMP
Jun-07
Aug-08
Nov-07
Rs. 1,775
Jan-09
Apr-08
CEAT PE
Jun-09
Apollo PE
Sep-08
Nov-09
Feb-09
Apr-10
CEAT – One Year forward PE
Jul-09
Sep-10
1Y Target
Dec-09
Rs. 1,950
Feb-11
May-10
Jul-11
Apollo Tyres – One Year forward PE
Avg
Oct-10
Avg
Dec-11
Mar-11
May-12
Aug-11
Oct-12
Rating
ADD
Jan-12
Mar-13
Jun-12
Nov-12 Aug-13
Apr-13 Jan-14
+1sd
+1sd
Sep-13 Jun-14
Feb-14 Nov-14
Jul-14 Apr-15
Dec-14 Sep-15
May-15 Feb-16
2.9
6.3
9.8
Jul-16
-1sd
Oct-15
-1sd
8.2
Mar-16 Dec-16
10.3
Aug-16 May-17
6.1
Jan-17 Oct-17
Jun-17
Page 57
CEAT LTD Rs. 1,775 Rs. 1,950 ADD
Financial Summary
Abridged Financial Statements
Rs. mn FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Profit & Loss
Revenue 48,811 53,548 55,726 54,551 57,017 61,130 67,605 75,935
Gross profit 15,040 18,876 21,376 23,655 23,264 23,380 27,042 30,374
EBITDA 3,922 6,023 6,318 7,818 6,467 6,396 9,194 10,783
Depreciation 782 826 879 1,068 1,420 1,670 2,084 2,582
EBIT 3,141 5,197 5,440 6,750 5,046 4,726 7,111 8,200
Other Income 215 220 289 461 411 452 497 547
Interest expense 1,898 1,645 1,300 933 791 932 1,226 1,633
Exceptional items 0 0 0 0 0 0 0 0
PBT 1,457 3,772 4,429 6,277 4,666 4,246 6,382 7,115
Reported PAT (after minority interest) 1,063 2,538 2,990 4,451 3,627 3,095 4,652 5,186
Adj PAT 1,063 2,538 2,990 4,451 3,627 3,095 4,652 5,186
EPS (Rs.) 31.1 70.6 73.9 110.0 89.7 76.5 115.0 128.2
Balance Sheet
Net Worth 7,430 9,671 15,985 19,491 23,062 25,772 29,740 34,165
Deferred Tax 1,320 1,414 1,545 1,481 2,030 2,030 2,030 2,030
Total debt 10,117 11,487 7,594 6,510 7,751 8,751 12,951 15,951
Other liabilities and provisions 849 945 1,328 913 1,365 1,363 1,428 1,511
Total Networth and liabilities 19,716 23,517 26,452 28,395 34,207 37,916 46,148 53,657
Gross Fixed assets 21,668 22,116 23,106 20,809 26,554 32,054 41,054 49,554
Net fixed assets 15,029 14,742 14,813 19,747 24,089 27,918 34,835 40,753
Capital work-in-progress 99 302 1,641 2,135 488 488 488 488
Goodwill 0 0 0 0 0 0 0 0
Investments 447 1,243 4,368 2,244 2,587 2,587 2,587 2,587
Cash and bank balances 814 1,030 622 242 175 471 1,034 1,761
Loans & advances and other assets 2,500 2,057 1,828 2,586 3,624 3,240 3,583 4,025
Net working capital 288 3,819 2,806 1,441 3,246 3,245 3,686 4,140
Total assets 19,716 23,517 26,452 28,395 34,207 37,916 46,148 53,657
Capital Employed 18,867 22,572 25,124 27,481 32,842 36,553 44,720 52,146
Invested Capital (CE - cash - CWIP) 17,954 21,240 22,862 25,105 32,180 35,594 43,198 49,897
Net debt 9,303 10,457 3,412 5,868 6,933 7,637 11,274 13,546
Cash Flows
Cash flows from Operations (Pre-tax) 4,932 3,429 8,023 9,076 4,312 7,231 8,972 10,517
Cash flows from Operations (post-tax) 4,618 2,367 6,716 7,146 2,975 6,080 7,242 8,589
Capex 518 651 2,328 -1,803 4,098 5,500 9,000 8,500
Free cashflows 4,100 1,716 4,388 8,949 -1,123 580 -1,758 89
Free cashflows (post interest costs) 4,100 1,716 4,388 8,949 -1,123 580 -1,758 89
Cash flows from Investing -220 -1,447 -5,453 3,927 -4,440 -5,500 -9,000 -8,500
Cash flows from Financing -4,774 -895 -5,770 -2,078 373 -284 2,321 638
Total cash & liquid investments 814 1,030 622 242 175 471 1,034 1,761
Page 58
Financial Summary

Growth ratios
Revenue 9.2% 9.7% 4.1% -2.1% 4.5% 7.2% 10.6% 12.3%
EBITDA 59.0% 53.6% 4.9% 23.7% -17.3% -1.1% 43.7% 17.3%
Adj PAT 1319.6% 138.7% 17.8% 48.9% -18.5% -14.7% 50.3% 11.5%
Margin ratios
Gross 30.8% 35.3% 38.4% 43.4% 40.8% 38.2% 40.0% 40.0%
EBITDA 8.0% 11.2% 11.3% 14.3% 11.3% 10.5% 13.6% 14.2%
Adj PAT 2.2% 4.7% 5.4% 8.2% 6.4% 5.1% 6.9% 6.8%
Performance ratios
Pre-tax OCF/EBITDA 125.7% 56.9% 127.0% 116.1% 66.7% 113.1% 97.6% 97.5%
OCF/IC (%) 25.7% 11.1% 29.4% 28.5% 9.2% 17.1% 16.8% 17.2%
RoE (%) 15.2% 29.7% 23.3% 25.1% 17.0% 12.7% 16.8% 16.2%
RoCE (%) 12.5% 17.6% 16.2% 19.4% 14.1% 10.9% 13.6% 13.2%
RoCE (Pre-tax) 17.2% 26.1% 24.0% 27.4% 18.1% 14.9% 18.7% 18.1%
RoIC (Pre-tax) 16.7% 26.5% 24.7% 28.1% 17.6% 13.9% 18.0% 17.6%
Fixed asset turnover (x) 2.3 2.4 2.5 2.5 2.4 2.1 1.8 1.7
Total asset turnover (x) 2.5 2.5 2.2 2.0 1.8 1.7 1.6 1.5
Financial stability ratios
Net Debt to Equity (x) 1.3 1.1 0.2 0.3 0.3 0.3 0.4 0.4
Net Debt to EBITDA (x) 2.4 1.7 0.5 0.8 1.1 1.2 1.2 1.3
Interest cover (x) 2.4 1.4 5.2 7.7 3.8 6.5 5.9 5.3
Cash conversion days 2 26 18 10 21 19 20 20
Working capital days 15 34 22 21 35 31 32 32
Valuation metrics
Fully Diluted Shares (mn) 34.2 36.0 40.5 40.5 40.5 40.5 40.5 40.5
Market cap (Rs.mn) 71,799
P/E (x) 57.2 25.1 24.0 16.1 19.8 23.2 15.4 13.8
P/OCF(x) 15.5 30.3 10.7 10.0 24.1 11.8 9.9 8.4
EV (Rs.mn) (ex-CWIP) 81,003 81,954 73,571 75,532 78,244 78,948 82,585 84,858
EV/ EBITDA (x) 20.7 13.6 11.6 9.7 12.1 12.3 9.0 7.9
EV/ OCF(x) 17.5 34.6 11.0 10.6 26.3 13.0 11.4 9.9
FCF Yield 0.8% -2.4% 0.1%
Price to BV (x) 9.7 7.4 4.5 3.7 3.1 2.8 2.4 2.1
Dividend pay-out (%) 10.0% 11.0% 12.0% 9.0% 8.8% 9.9% 12.2% 12.2%
Dividend yield (%) 0.4% 0.8% 0.9%
Page 59
Crystal Ball Gazing
Expect CEAT to continue to grow its non-T&B tyre revenue viz PCR and 2W segment enabling it to steadily improve its margins
and accruals. The gradual coming on-stream of its capacities (TBR/PCR and 2W) through FY22 would enable it to cater to the
steady demand from these segments, thereby continuing to enjoy strong market share in these segments, and report a revenue
and PAT CAGR of 9.5% and 12.1% through FY21E.
Multiple expansion could be inhibited by the

Expect margin to be aided by the increasing Expect RoCEs to be depressed consequent to the
depressant impact of capex on RoCEs; however, the
proportion of PCR and 2W revenue, enabled by large capex plans; however, strong cash accruals to
same could be partially outweighed by Increase in
significant capacities coming on-stream through FY22 inhibit any deterioration of balance sheet strength
proportion of more profitable businesses (PCR/2W)
FY05-FY11 FY11-FY14 FY14-FY17 FY18-FY21E FY05-FY11 FY11-FY14 FY14-FY17 FY18-FY21E PE multiple FY21E EPS (Rs.) Price target
Revenue CAGR 15% 15% 2% 10% RoE (%) 10.4% 12.4% 23.8% 15.3% 16x 38 175
Gross Margin 30% 29% 39% 40% RoCE (%) 8.5% 11.1% 16.8% 12.6%
EBITDA CAGR 20% 63% 2% 24% RoIC (%) 10.7% 15.5% 24.2% 16.7%
EBITDA margin 5.4% 7.2% 12.1% 13.3% Average 1 yr fwd
EPS CAGR 183% 125% 13% 23% PE (x) 4.5* 3.7 9.5 n/a
Total Asset Turnover (x) 2.1 2.4 2.1 1.6 EV/EBITDA (x) 4.3* 4.0 5.8 n/a
Total WC days 20 20 28 32 Peak 1 yr fwd
Pre-tax OCF/EBITDA (%) 153% 88% 92% 102% PE (x) 5.6* 5.5 12.5 n/a
Post Tax OCF as a % of IC 15% 11% 20% 17% EV/EBITDA (x) 6.3& 6.6 7.7 n/a
Debt/EBITDA 6.8 3.9 1.0 1.2 * (FY11)
TOTAL
EBITDA CAGR of ~12%, RETURN OF
Entry = Rs. 1,775@ 15.4 Cumulative Dividends of
exit multiple of 16x on
FY19E EV/EBITDA Rs.40/share
FY21E EPS 30%
Page 60
Apollo Tyres – Financial Summary
Financial Summary
Abridged Financial Statements
Rs. mn FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Profit & Loss
Revenue 1,27,946 1,34,120 1,27,851 1,18,381 1,31,800 1,44,453 1,69,282 1,88,635
Gross profit 47,977 56,399 57,223 58,833 62,900 63,640 80,141 94,174
EBITDA 14,567 18,755 19,305 19,870 18,464 16,244 24,431 28,922
Depreciation 3,966 4,109 3,883 4,268 4,618 5,524 6,481 7,231
EBIT 10,601 14,647 15,422 15,602 13,846 10,719 17,951 21,691
Other Income 944 978 538 680 1,541 1,393 1,549 1,782
Interest expense 3,128 2,838 1,827 926 1,029 1,258 1,301 1,171
Exceptional items 169 -468 -825 478 0 0 0 0
PBT 8,586 12,319 13,308 15,802 14,355 10,855 18,200 22,302
Reported PAT (after minority interest) 6,138 10,050 9,776 11,230 10,990 8,297 12,872 15,773
Adj PAT 5,959 9,658 9,776 11,230 10,990 8,297 12,872 15,773
EPS (Rs.) 11.8 19.0 19.2 22.1 21.6 14.5 22.5 27.6
Balance Sheet
Net Worth 34,009 45,746 50,423 66,046 72,900 94,137 1,04,949 1,18,663
Deferred Tax 4,928 5,241 4,912 6,410 7,032 7,032 7,032 7,032
Total debt 26,507 14,503 11,135 15,507 38,866 34,351 37,101 34,572
Other liabilities and provisions 9,738 10,679 10,744 12,542 16,261 18,183 20,424 22,166
Total Networth and liabilities 75,182 76,170 77,214 1,00,504 1,35,058 1,53,703 1,69,506 1,82,433
Gross Fixed assets 85,489 94,681 90,651 1,02,864 1,21,994 1,46,994 1,68,544 1,83,544
Net fixed assets 41,693 44,558 42,685 50,630 65,141 84,617 99,686 1,07,455
Capital work-in-progress 3,199 465 2,182 9,936 29,151 29,151 29,151 29,151
Goodwill 1,436 1,376 1,165 1,982 1,774 1,774 1,774 1,774
Investments 546 637 1,470 5,059 3,962 3,962 3,962 3,962
Cash and bank balances 3,348 6,541 5,946 5,942 3,369 4,400 1,120 2,374
Loans & advances and other assets 4,816 5,672 5,034 12,152 11,248 12,880 14,898 16,644
Net working capital 20,145 18,553 18,731 14,803 20,413 16,859 18,855 21,013
Total assets 75,182 76,170 77,214 1,00,504 1,35,058 1,53,703 1,69,506 1,82,433
Capital Employed 65,444 65,491 66,470 87,963 1,18,797 1,35,520 1,49,082 1,60,266
Invested Capital (CE - cash - CWIP) 58,897 58,486 58,342 72,085 86,277 1,01,969 1,18,811 1,28,742
Net debt 23,160 7,963 5,189 9,565 35,496 29,951 35,981 32,198
Cash Flows
Cash flows from Operations (Pre-tax) 13,915 18,841 16,970 23,478 12,289 19,400 22,908 27,371
Cash flows from Operations (post-tax) 12,781 16,455 14,016 21,225 9,025 16,842 17,580 20,842
Capex 6,319 4,989 6,269 16,213 33,190 25,000 21,550 15,000
Free cashflows 6,463 11,465 7,747 5,012 -24,165 -8,158 -3,970 5,842
Free cashflows (post interest costs) 3,335 8,628 5,919 4,097 -25,194 -9,416 -5,271 4,672
Cash flows from Investing -5,973 -1,192 -7,396 -22,828 -29,419 -25,000 -21,550 -15,000
Cash flows from Financing -5,053 -12,076 -6,836 -2,547 18,946 9,249 691 -4,589
Total cash & liquid investments 3,348 6,541 5,946 5,942 3,369 4,400 1,120 2,374
Page 61
Apollo Tyres – Financial Summary
Financial Summary

Growth ratios
Revenue 5.3% 4.8% -4.7% -7.4% 11.3% 9.6% 17.2% 11.4%
EBITDA 24.9% 28.8% 2.9% 2.9% -7.1% -12.0% 50.4% 18.4%
Adj PAT 48.9% 63.7% -2.7% 14.9% -2.1% -24.5% 55.1% 22.5%
Margin ratios
Gross 37.5% 42.1% 44.8% 49.7% 47.7% 44.1% 47.3% 49.9%
EBITDA 11.4% 14.0% 15.1% 16.8% 14.0% 11.2% 14.4% 15.3%
Adj PAT 4.7% 7.2% 7.6% 9.5% 8.3% 5.7% 7.6% 8.4%
Performance ratios
Pre-tax OCF/EBITDA 95.5% 100.5% 87.9% 118.2% 66.6% 119.4% 93.8% 94.6%
OCF/IC (%) 21.7% 28.1% 24.0% 29.4% 10.5% 16.5% 14.8% 16.2%
RoE (%) 19.1% 24.2% 20.3% 19.3% 15.8% 9.9% 12.9% 14.1%
RoCE (%) 13.0% 19.5% 17.8% 15.0% 11.4% 7.3% 9.7% 10.7%
RoCE (Pre-tax) 18.3% 23.9% 24.2% 21.1% 14.9% 9.5% 13.7% 15.2%
RoIC (Pre-tax) 18.4% 25.0% 26.4% 23.9% 17.5% 11.4% 16.3% 17.5%
Fixed asset turnover (x) 1.5 1.5 1.4 1.2 1.2 1.1 1.1 1.1
Total asset turnover (x) 1.8 1.8 1.7 1.3 1.1 1.0 1.0 1.1
Financial stability ratios
Net Debt to Equity (x) 0.7 0.2 0.1 0.1 0.5 0.3 0.3 0.3
Net Debt to EBITDA (x) 1.6 0.4 0.3 0.5 1.9 1.8 1.5 1.1
Interest cover (x) 4.1 5.8 7.7 22.9 8.8 13.4 13.5 17.8
Cash conversion days 57 50 53 46 57 43 41 41
Working capital days 43 37 37 44 43 29 29 30
Valuation metrics
Fully Diluted Shares (mn) 504.1 509.1 509.1 509.1 509.1 572.0 572.0 572.0
Market cap (Rs.mn) 1,42,440
P/E (x) 21.1 13.1 13.0 11.3 11.5 17.2 11.1 9.0
P/OCF(x) 11.1 8.7 10.2 6.7 15.8 8.5 8.1 6.8
EV (Rs.mn) (ex-CWIP) 1,62,401 1,49,938 1,45,447 1,42,069 1,48,786 1,43,241 1,49,270 1,45,487
EV/ EBITDA (x) 11.1 8.0 7.5 7.1 8.1 8.8 6.1 5.0
EV/ OCF(x) 12.7 9.1 10.4 6.7 16.5 8.5 8.5 7.0
FCF Yield -5.7% -2.8% 4.1%
Price to BV (x) 4.2 3.1 2.8 2.2 2.0 1.5 1.4 1.2
Dividend pay-out (%) 4.2% 3.9% 10.4% 9.1% 9.3% 20.7% 13.3% 10.9%
Dividend yield (%) 1.2% 1.2% 1.2%
Page 62
Apollo Tyres
Crystal Ball Gazing
Expect APTY to report a revenue and PAT CAGR of 12% and 14% each through FY17-FY21E. Steady increase in utilisation levels
would enable steady improvement in margin levels; margin improvement would also be aided by the ramping up of the low-cost
Hungary plant
Expect back-ended improvement in cash accruals led Strong growth prospects in EU, dominant market
RoCE to chart an upwards trajectory post FY19E,
by the ramping up of operations at Hungary plant positioning in domestic markets, coupled with
which would lend support to multiples
coupled with stable demand drivers improving return ratios to support multiples
FY08-FY11 FY11-FY14 FY14-FY17 FY18-FY21E FY05-FY11 FY11-FY14 FY14-FY17 FY18-FY21E P/E multiple FY21E EPS (mn) Price target
Revenues CAGR 24% 15% -1% 12% RoE (%) 20.8% 18.6% 19.9% 12.8% 12 32.0 385
Avg. Gross Margin 38% 38% 46% 47% RoCE (%) 14.6% 14.2% 15.9% 9.8%
EBITDA CAGR 18% 24% -1% 26%
RoIC (%) 25.6% 19.7% 23.2% 15.9%
Avg. EBITDA margin 11.6% 11.5% 15.0% 14.2%
Average 1 yr fwd
EPS CAGR 8% 42% 4% 30%
PE (x) 7.0* 6.6 8.5 -
Avg. Total Asset Turnover
2.1 1.8 1.5 1.0
(x) EV/EBITDA (x) n/a 4.3 4.8 -
Avg. Total WC days 30 41 40 30 Peak 1 yr fwd
Avg. Pre-tax OCF/EBITDA
96% 80% 93% 97% PE (x) 8.4* 8.8 10.3 -
(%)
Avg. Post Tax OCF as a % EV/EBITDA (x) n/a 5.0 6.2 -
26% 18% 23% 15%
of IC
* (FY09-FY11)
Avg. Net Debt/EBITDA 1.3 1.7 0.8 1.3
TOTAL
PAT CAGR of ~14%, exit RETURN OF
Entry = Rs. 249@ 11.1x Cumulative Dividends of
multiple of 12x on FY21E
FY19E EPS Rs.12/share
EPS 60%
Page 63
CEAT LTD
Spark Disclaimer
BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year horizon
Absolute Rating
Interpretation
ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon SELL Stock expected to fall >10% over a 1-year horizon
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Page 64
CEAT LTD
Spark Disclaimer
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incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:
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Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:
▪ Managing/co-managing public offering of securities
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DOMESTIC TYRE INDUSTRY

December 18, 2017

▪ MUKESH SARAF , mukesh@sparkcapital.in, +91 44 4344 0041

Source Industry, Spark Capital Source Company, Spark Capital

Farm and OTR Others

PCR, 39.0% T&B

Source Company, Spark Capital Source Company, Spark Capital

Source Company, Spark Capital Source Company, Spark Capital

JK Tyres (Standalone): Revenue contribution by end use market– FY17

OEM ▪ With its segmental contribution similar to that of CEAT,

Source Company, Spark Capital

% of Radialisation by end use market

Source Company, Spark Capital Source Company, Spark Capital

Apollo, 24% CEAT , 12-14%

FY17E ▪ Apollo has a stronger presence in the T&B

Source JK Tyres Presentation, Spark Capital Source Company, Spark Capital

The average replacement

Source Spark Capital

Source: ATMA, Spark Capital

2.3 0.5 0.9 3.6

0.4 0.4 0.8

0.3 0.3 0.5

0.9 0.5 1.4

Imports 1.4 1.0

Source: Industry, Spark Capital

Note: MRF’s capacities are not available Page 11

Source: Industry, Spark Capital

▪ In Jan17, MRF announced a greenfield project in Gujarat, involving an outlay of

Source: Industry, Spark Capital

Source: Industry, Spark Capital

2W + 3W OEM Tyre market (# of

Source: ATMA, Spark Capital

FY20E 54% 46%

Source Spark Capital Source Spark Capital

Market Shares – 2W segment

2W/3W market shares

TVS Tyres, 25-

Source: Industry, ATMA, Spark Capital

▪ TVS tyres has recently expanded capacities from 27.6mn

Source: Industry, Spark Capital

Source: Industry, Spark Capital Total 5,300 4,500 4000 5000

PCR OEM Tyre market

Total PCR tyres , OEM + Replacement)

Source: ATMA, Spark Capital

FY20E 54% 46% PCR market shares

OEM % Replacement % JK Tyres, ~10-12%

Source Company, Spark Capital Source Company, Industry, Spark Capital

9% 11% 11% 9% 10% 10% 8%

56% 51% 45% 44% 38% 36% 38%

FY11 FY12 FY13 FY14 FY15 FY16 FY17

Source SIAM, Spark Capital

CEAT is expected to lead in capacity additions over the near term

▪ Capacities of ~5.8mn tyres p.a. being currently utilised at ~80-85%

▪ Bridgestone has announced plans to enhance its overall tyre production

Source: Industry, Spark Capital

PCR market shares

Exclusive dealers 1,700 490 n/a 3200

97 Non-exclusive dealers 3,600 4010 n/a 1800

Total 5,300 4,500 4000 5000

Source: Industry, Spark Capital

Source: Industry, Spark Capital

Expect capacity additions through FY18-FY20E to be led by Apollo and CEAT

FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Cumulative additions to gross block indexed to FY08(%)