Hold CEAT; target of Rs 3063: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on CEAT with a target price of Rs 3063 in its research report dated October 19, 2024.

Broker Research

October 21, 2024 / 14:31 IST

hold

Prabhudas Lilladher's research report on CEAT

CEAT’s Q2FY25 revenue increased by 8.2% YoY, driven by healthy demand in the replacement and international markets. Rise in key input prices led to a steep decline in gross margin by 594bps YoY to 37.4%. Higher input costs and rise in staff expenses on account of yearly increments, led to EBITDA margin declining by 398bps YoY to 11%. Further, APAT declined by 41.4% YoY, on weak operational performance. The management has announced price increases across its product range and plans more hikes, to mitigate some input cost pressure. Additionally, they expect demand momentum in H2FY25 to be robust, which shall aid in better volume and ASP growth in the upcoming months, while margins could be in the similar range given the volatility in input costs.

Outlook

Given the volatility in input costs, we lower our EBITDA & EPS estimates in the range of 7-12% and project revenue/EBITDA/PAT to grow at 10.9%/8%/9.4% CAGR over FY24-27E. We maintain our ‘Hold’ rating with a revised target price of Rs3,063 (down from Rs3,107), valuing it at 15x on its Sep’26E EPS.

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