June 29, 2016 / 18:10 IST
Religare's research report on Ceat
Post-expansion, CEAT’s capacity share for PV & 2W tyres will rise from 31% to 45%, while that for truck & bus tyres will roll back from 51% to 38%. With expanded capacity and high demand, CEAT expects volume growth in FY17 to beat last year’s 6%. The company has made inroads with clients such as BJAUT and HMSI in the 2W space, while its share in HMCL tyres has increased to 27% from 5% some years ago. CEAT’s capex is also on track and the company will spend ~Rs 5-6bn in FY17 towards capacity expansion.
We cut our FY17/FY18 earnings estimates by 12%/8% in order to factor in higher raw material costs. Our Mar’17 TP thus reduces from Rs 1,230 to Rs 1,120. We maintain BUY as the negatives appear priced in post the 23% correction in the stock over the last three months.
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