CEAT shares gain as India Ratings & Research upgrades outlook to 'positive' from 'stable'

Earlier, the stock had hit 52-week high of Rs 3,030 apiece on September 5, 2024

Shares of CEAT gained by a percent to Rs 2881 per share on September 11 after credit rating agency India Ratings & Research revised its outlook on the tyre maker to 'positive' from 'stable.'

So far this year, shares of CEAT surged over 17 percent, slightly above benchmark Nifty 50's 15 percent upmove. Earlier, the stock had hit 52-week high of Rs 3,030 apiece on September 5, 2024.

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In an earlier discussion with CNBC-TV18, the management mentioned plans for a 1-2 percent price increase in September to counter rising input costs. "We expect prices to stabilize by Q3FY25 (October-December 2024) and start to decrease by Q4FY25 or Q1FY26 (April-June 2025)," they noted.

Between April and August, CEAT implemented price hikes across its range: 3-4 percent for truck and bus radial tyres, 3 percent for passenger car tyres, and 1-1.5 percent for two-wheeler tyres.

In the June quarter, CEAT reported a 2.74 percent year-on-year (YoY) increase in profit after tax (PAT), with revenue from operations rising 8.79 percent YoY to Rs 3,192.82 crore.

Looking ahead, CEAT forecasts continued volume growth in Q2 and beyond. The company is also focusing on front-loading capital expenditures to stay ahead of growing market demand.

Recently, analysts at Emkay Global initiated coverage on CEAT with a 'buy' rating and Rs 3,650 target price.

"We project a 10 percent revenue CAGR and a 30 percent EPS CAGR for FY25E-27E. Strong profitability growth, coupled with strategic and measured capital expenditures (supported by brownfield expansions over the next 2-3 years), will further solidify the balance sheet and lift RoCE to around 19 percent. In our opinion, this comprehensive enhancement in both positioning and financial performance will drive a re-rating," noted Emkay Global analysts.

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