Buy Ceat, target of Rs 196: Sharekhan

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Buy Ceat, target of Rs 196: Sharekhan

Sharekhan has maintained its buy rating on Ceat with a revised price target of Rs 196. Ceat's Q4FY2008 results are ahead of research firm's expectations, mainly on the sales front. The net sales of the company grew by 14.8% to Rs 646.2 crore in the quarter.

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Sharekhan has maintained its buy rating on Ceat with a revised price target of Rs 196 in its May 20, 2008 research report. "Ceat's Q4FY2008 results are ahead of our expectations, mainly on the sales front. The net sales of the company grew by 14.8% to Rs 646.2 crore in the quarter. The original equipment (OE) sales continued to decline whereas the replacement sales grew strongly by 28.2% in Q4FY2008. The operating profit margin (OPM) declined by 180 basis points to 6.0% as a result of a higher raw material cost. Consequently, the operating profit declined by 12.3% to Rs 38.5 crore."

"We maintain our positive view on Ceat, as the stock is trading at very cheap valuations. The volume growth could be higher than our expectations in view of the improvement in the OE volumes, the company's ability to pass on any further rise in input prices to its customers and the cooling off of the key raw material prices. At the current market price of Rs119 the stock is trading at 5.2x its FY2010 earnings of Rs24.5 and enterprise value (EV/earnings before interest, tax, depreciation and amortisation (EBITDA) of 2.8x. We maintain our Buy recommendation on Ceat with a revised price target of Rs 196," says Sharekhan's research report.
 
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