Buy CEAT; target of Rs 2930: Motilal Oswal

Motilal Oswal's research report on CEAT

At its analyst meet, CEAT management highlighted its focus on: i) strengthening its brand presence in the domestic replacement segment, ii) expanding into export markets, particularly in the US, EU, and LatAM, and iii) reaffirming its cautious approach to capex, which should help CEAT sustain its double-digit ROCE. The company aims to achieve market leadership in the PCR segment over the next 2-3 years, maintain its leadership in 2W replacement, and increase the contribution of export revenue to around 25% from the current 19% over the coming years. The management is optimistic about the growth prospects, driven by anticipated double-digit growth in replacement volumes and expansion into key markets. However, despite the price increase, we are wary of the impact of rising commodity prices on overall profitability and will be closely monitoring it.

Outlook

CEAT’s focus on strategic areas such as PV/2W/OHT/exports (to help margins), along with prudent capex plans (to benefit FCF), should continue to improve its returns in the long run. Valuations, at 15.3x/12.6x FY25E/FY26E consol. EPS, also appear attractive. Hence, we reiterate our BUY rating on the stock with a TP of INR2,930 (based on ~15x Mar’26E EPS).