Buy CEAT; target of Rs 1860: Motilal Oswal

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Motilal Oswal's research report on CEAT

CEAT hosted the investing community, followed by a plant visit to its Halol facility and an the overview of its R&D center. The company showcased its R&D capabilities (including its design studio capabilities, tyre performance evaluation) through which it aims to explore incremental business avenues such as exports (scale international business to INR35b) and EVs (new product launches and increasing share in premium segment). Moreover, the company indicated its improved efficiency at its Halol plant, as overall energy cost fell by 15% due to digitization and ~22% including productivity. The company continues to focus on key strategic areas such as PV/2W/OHT (to help margins), along with the expansion in international markets and increasing business in EVs. This, along with prudent capex plans (to benefit FCF), should be a long-term growth catalyst for the company.

Outlook

Valuations at 11.6x/9.2x FY24E/FY25E consolidated EPS do not fully capture the benefits from the new capacities and softening of RM costs. We reiterate our BUY rating with a TP of INR1,860 (based on ~13x Dec-24 EPS).

For all recommendations report, click here

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CEAT - 01 -03 - 2023 - moti