Accumulate CEAT; target of Rs 1434: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on CEAT

CEAT’s 3QFY21 consol results beat our estimates with margin sustaining at 14.8% expanding 440bp YoY (PLe 11.5%), despite RM headwinds (+1.5% increase in RM/kg) and lower replacement mix (~65% v/s ~70% in Q2). With continual healthy growth in replacement segment and likely price rise, we expect margins to remain elevated at 13.5-14% even in 4Q. However, it can normalize at 11.5-12% in FY22/23 led by a) replacement mix normalizing to 60% level (v/s ~65% currently), b) RM inflation and c) increase in marketing spends.

Outlook

We factor in Revenue/EBITDA/PAT CAGR of 9.3%/14%/13.9%. Consequently, we maintain Accumulate with revised price target of Rs1,434 (earlier Rs1,297), based on 15x Mar-23 consol EPS. CEAT trades at 15x/13.7x FY22/23 consol EPS (v/s 15x 5 year LPA).

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