Hold CEAT; target of Rs 3500: ICICI Direct

ICICI Direct's research report on CEAT

In a deal valued at ~USD 225mn, CEAT has completed its acquisition of the CAMSO brand’s off-highway construction equipment-bias tyre and tracks business from Michelin. This opens the door for CEAT to a global customer base (40 OEMs and premium OHT distributors). Further, this now also complements CEAT’s existing portfolio to include tracks and construction-bias tires. In the transition phase, over the next 4–6 quarters, turnover/margin for CAMSO shall be lower, and turn EBITDA accretive post this period (high-teen margins expected).

Outlook

While medium-term prospects for CAMSO remain healthy, we remain vigilant towards potential near-term growth/margin vulnerabilities stemming from US-tariff. Retain HOLD; TP revised to INR 3,500 (vs. INR 3,750), based on 17x FY27E EPS.