Buy CEAT; target of Rs 1994: Chola Securities

Chola Securities is bullish on CEAT has recommended buy rating on the stock with a target price of Rs 1994 in its research report dated February 05, 2018.

Broker Research

February 12, 2018 / 20:53 IST

It seems that nationwide lockdown has not much impacted the fertilizer sector. In May 2020, the Indian Fertiliser industry has witness sales growth of 25% to 5 million tonnes as compared to 4 million tonnes in the same month last year. Coromandel International and Chambal Fertilisers have seen major sales growth in the sector. The research firm Prabhudas Lilladher is bullish on 5 stocks in the sector and among that they expect stock Insecticides India may see the upside of 82 percent, report dated June 09, 2020.

Chola Securities' research report on CEAT

CEAT, part of the RPG group, is one among the top four tire manufacturers in India with a total manufacturing capacity of >1000 MT/day & manufacturing plants situated in Nashik, Bhandup (Mumbai),Ambernath, Halol, and Gujarat, the company manufactures all tires: Truck & Bus (33%), 2W/3W (32%), Passenger vehicles (14%), LCV (12%), Off Highway (12%). In terms of market, replacement contributed 62% of the sales while OEM and exports make up 26% and 12% of the sales, respectively. CEAT has a robust distribution network consisting of over 4,500 dealers, 33 regional offices and more than 500+ C&F agents. CEAT commands >12% market share in the T&B segment, 7% in the Passenger car segment, 16% in LCV segment and 22% in the 2/3W segment.

Outlook

We introduce FY20 estimates (Revenue/EPS: +11.4%/+13% YoY) and roll over valuations on FY20 estimates. At CMP, the stock is trading at P/E of 14.7X/13x on FY19E/FY20E EPS, respectively. We arrive at a revised price target of INR 1,994 based on P/E of 16x FY20EPS and maintain BUY rating on the stock. Risks: Further increase in rubber & crude prices can negatively impact margins.

For all recommendations report, click here