Goal: ₹3,651
CMP: ₹3,089.50
Ceat appears effectively poised to trip the expansion wave whereas prudently navigating the steep RM inflation developments. Demand outlook stays unchanged; excessive single to early double digit quantity progress is probably going in FY25.
Going ahead, deal with high-margin segments like exports, PCR (excessive rim sizes) and OHT over TBR (low ROCE biz) to assist volumes and margins. Exports are a key progress lever, led by new SKU launches for PCR, TBR and agri radials in key markets like Europe and US. We count on constant value hikes, and up to date RM basket correction (each NR and brent crude declined by 24/11 per cent from its current peak) to assist margins from This fall-FY25 though gross margins to remain weak even in 3QFY25.
We have now in-built Income/EBITDA/Adj.PAT CAGR of round 13/12/10 per cent for FY24-27E, tweaking FY25-26 EPS by 2-3 per cent to account for NR volatility, which is partially offset by a beneficial combine.
Valuations at 19x/13.6x FY26/17 consol EPS (vs 10yr LPA of round 18.6x) appear affordable and are but to mirror the improved positioning. Reiterate ‘Add’ with TP at ₹3,651 (SoTP)
Sustenance of value hikes and NR volatility stay the important thing factor to observe for margins forward.
