Accumulate CEAT; target of Rs 899: Prabhudas Lilladher

Prabhudas Lilladher's research report on CEAT

CEAT's consolidated revenues were in-line at Rs15.7b (-10.6% YoY/ QoQ), led by volume decline as pricing was stable. Margins were better at 12.7% (PLe 7.1%), led by soft RM and cost control initiatives. While we slash FY21/22 revenues by 10.1%/8.6% (to factor in for lower OEM sales and weak replacement sales in CV segment), we upgrade margins by 100bp/80bp due to higher replacement share, lower RM and cost control benefits. This has resulted in increase in Adj. PAT by 6.7%/2.5%, as better operating performance is partially offset by lower other income and higher tax. We believe with bunch of capex (and FY21 capex guidance to Rs5.5b v/s Rs8b earlier) and higher replacement mix, CEAT is best placed to ride replacement demand recovery.

Outlook

Consequently, we maintain 'Accumulate' rating on the stock with a price target of Rs899 (earlier Rs893), based on 15x Mar-22 EPS.

CEAT 01062020-prabhu