Accumulate CEAT; target of Rs 960: Dolat Capital

Dolat Capital's research report on CEAT

CEAT reported a strong operating performance in Q4FY20, despite challenging conditions. EBITDA grew 23% YoY to Rs 2bn. Operating margin benefited from lower RM prices, operational efficiency, and 40bps in positive impact due to finished goods inventory absorption. EBITDA margin, adjusted for one-offs, expanded 190bps QoQ to 12.3% (versus our estimate of Rs.10.3bn). Consolidated revenue de-grew 10.6% YoY to Rs.15.7bn (versus our estimate of Rs.16.1bn).

Outlook

AT CMP, stock is trading at 17/12x for FY21/22E EPS vs historical mean of 16x. We recommend to Accumulate with TP of Rs 960 (based on 14x FY22E Consolidated EPS).

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