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Last Updated : Feb 12, 2018 09:03 PM IST | Source: Moneycontrol.com

Buy CEAT; target of Rs 1918: Edelweiss Securities

Edelweiss Securities is bullish on CEAT has recommended Buy rating on the stock with a target price of Rs 1918 in its research report dated February 2, 2018.

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Edelweiss Securities' research report on CEAT


CEAT’s Q3FY18 operating performance came broadly in line with our estimate. Management has raised FY19 capex to INR15-17bn (from ~INR10bn), largely directed at PV tyres. While this reflects management’s growing confidence in growth prospects, we anticipate margin pressure in the near term due to: (1) sharpened focus on low margin PV OEMs—an imperative for long-term brand building in the replacement market; and (2) higher opex. Also, we believe limited capacity in CV tyres (~45% revenue) will lead to muted volume growth.

Outlook

We estimate EPS CAGR of 35% over FY18-20. We believe the stock should trade in the 12-15x PE band depending on its product mix, capex cycle and rubber prices. At CMP, the stock trades at 13.9x/12.0x FY19E/FY20E PER. We maintain ‘BUY’ with revised TP of INR1,918 (PER of 14x FY19E).

For all recommendations report, click here


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First Published on Feb 2, 2018 08:48 pm
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