Motilal Oswal's research report on CEAT
CEAT’s 1QFY24 revenue growth was muted; however, margins improved as RM costs declined 1.5% QoQ. While the RM cost basket seems to be settling down at the current level, volume recovery would be crucial for the replacement and OEMs segments. Exports have started recovering from the lows of FY23, but a full recovery is expected in 2HFY24. We raise our FY24E/FY25E EPS by 11%/9% to account for a) lower volume and realization growth in key categories, b) better gross margins, c) higher interest costs, and d) a lower tax rate.
Outlook
We raise our target multiple for CEAT to 15x from 13x (similar to APTY) to factor in its focus on capital allocation and the resultant increase in capital efficiency. Maintain BUY with a TP of INR3,000 (based on ~15x Sep’25E EPS).
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