Prabhudas Lilladher's research report on CEAT
CEAT’s consolidated performance was better led by higher than expected volumes in the replacement side while pricing remained stable. We expect operating performance to be healthy in near to med term led by better mix (higher replacement share), soft RM (declined 6% YoY in Q1) and cost control benefits. We believe CEAT to continue gain market share (gained ~1-2% in FY20) across categories especially in 2W, PV and farm segments. We largely maintain FY22/23 EPS and factor in revenue/EBITDA/PAT CAGR of 7.5%/10.5%/8.5%. With reduced capex intensity (cumulative capex of Rs12bn in FY22/23 v/s Rs26bn in FY19/20) we expect CEAT to turn FCF positive from FY22/23.
Consequently, we maintain Accumulate with price target of Rs951 (earlier Rs958), based on 16x Mar-22 consol EPS.