Buy Ceat; target of Rs 141: Sushil Finance

Sushil Finance is bullish on Ceat and has recommended buy rating on the stock with a target of Rs 141 in its November 12, 2012 research report.

“CEAT ltd.(CEAT), a flagship Company of the RPG Enterprises is among the leading tyre manufacturer. CEAT commands 12% of the India tyre market based on volume, by manufacturing 10 mn tyres every year. The Company owns two manufacturing facility in Maharashtra (Bhandup & Nasik) and has also setup one green field radial tyre manufacturing facility at Gujrat (Halol). The Company has subsidiary in Sri Lanka, which manufactures bias as well radial tyres.”
“The net sales grew 7.5% YoY to Rs.12,220.1 mn with replacement market contributing to 54% of the sales while exports and OEMs consisting another 22% and 24% respectively. On the sequential basis, the revenues declined marginally from Rs.12,303.0 mn in Q1 FY13 registering a minor de‐growth of 0.7%. The marginal decline was due to sluggish demand from the automobile sector, monsoon season and flattish replacement demand. During the quarter, the EBITDA showcased healthy growth of 30.4% to Rs. 875.7 mn on YoY basis and the EBIDTA margin improved to 7.2%, expansion in the operating level profitability was the function of significantly lower raw material prices. However on the sequential basis, the EBIDTA declined from Rs.1,118.2 mn in Q1 FY13 registering degrowth of 21.7%, on the back of increase in the employee and advertisement expenses.”
“Ceat Ltd. is the part of the RPG group and is the fourth largest tyre manufacturer in India. With huge growth expected in the auto sector the OEMs and the replacement market are expected to grow significantly sector, over the next few years. During the last quarter, the Company posted a weak performance due to slowdown in the demand from the automobile industry. However, Ceat expects prices of natural rubber to decline going forward. We maintain our buy rating for the stock on the back of capacity expansion at the Halol facility, coupled with the lower rubber prices over the few quarters,” says Sushil Finance research report.  Non-Institutions holding more than 90% in Indian cos  Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

Read More