Buy CEAT; target Rs 125: Nirmal Bang

Nirmal Bang is bullish on CEAT and has recommended buy rating on the stock with a target of Rs 125 in its August 3, 2012 research report.

"CEAT reported good results for Q1FY13 which was driven by sharp improvement in operating margins on YoY basis boosted by declining natural rubber prices and increasing capacity utilization at the Halol plant. However, on QoQ basis the margins were a bit lower which was in line with expectations. We retain our positive view on CEAT and maintain Buy rating on the stock."

"CEAT reported good results for Q1FY13 which was driven by sharp improvement in operating margins on YoY basis boosted by declining natural rubber prices and increasing capacity utilization at the Halol plant. However, on QoQ basis the margins were a bit lower which was in line with expectations. We retain our positive view on CEAT and maintain Buy rating on the stock."

"Sri Lankan business reported net sales of Rs 92.9 cr up 17% YoY and down 4% QoQ. EBITDA margin stood at 14.9% vs 14.5% in Q4FY12 primarily due to benefit of rupee depreciation. Consolidated net sales increased 10% YoY to Rs 1,225 cr; Consolidated EBITDA margin stood at 9.3% with a PAT of Rs 29 cr in Q1FY13."

"We expect CEAT to report continuous improvement in its operating performance, led by improving utilization at the Halol plant and declining raw-material prices. Changing product mix, expanding presence and attractive valuations seem propelling for CEAT at current levels."

"At CMP, the stock is trading at P/E of 3.21x FY13E and 2.54x FY14E earnings with an EV/EBITDA of 3.16x and 3.09x which we believe are lower as compared to peers. We maintain BUY on the stock with a target price of Rs 125 (4x FY13E EPS of 31.2)," says Nirmal Bang research report.

Institutional holding more than 40% in Indian cos

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