Buy CEAT; target of Rs 936: Motilal Oswal

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Motilal Oswal 's research report on CEAT

CEAT’s beat in the performance for 4QFY20 was completely driven by favorable RM cost. The trend in spot prices in key commodities indicates further material benefits would accrue from 2QFY21. This, coupled with the tax benefit on accumulated loss in the OTR business, offset the impact of weak demand on PAT. Hence, we largely maintain our estimate, which implies ~2%/12%/15% revenue/EBITDA/EPS CAGR over FY20–22E. Maintain Buy.

Outlook

Valuations at 15.8x/10.8x FY21/22E consol. EPS does not fully capture the benefit of substantial capacity addition. Maintain Buy with TP of ~INR936.

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