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NEW DELHI: The auto sector, and by extension auto ancillaries, were cruising on a highway a couple of months back, but as a devastating second wave of the Covid-19 pandemic surfaced, these stocks have hit a number of bumps and got slowed down.
Analysts now say CEAT, a smallcap tyre manufacturer, appears to be getting bruised badly from the jolts. They say rising raw material costs, declining demand and lower cash flow generation will likely hurt the stock’s prospects in the coming year.
Siddhartha Bera, an analyst at Nomura, said the company’s March quarter numbers were below expectations. “There are growth and margins headwinds ahead,” he said, adding that strong commodity cost pressure and additional capex would impact the firm’s free cash flow generation, swelling its debt burden.