Ceat's Integration Of Camso To Be A Key Monitorable, Says Motilal Oswal Maintaining 'Buy'

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Motilal Oswal Report

We met Ceat Ltd. management at the RPG Conference. In India business, management continues to expect good demand in the tractor and two-wheeler replacement segments even as two-wheeler OEM demand is now slowing down. While passenger vehicle replacement is likely to post 0-5% growth, PV OEMs are likely to be flat YoY in FY26.

Management expects truck-bus radial replacement to grow in single digits, and TBR OEMs are likely to post 5% growth in FY26. Further, the full benefit of the decline in input costs is likely to be reflected by Q2 FY26. The pricing discipline remains stable, and Ceat has been able to hold on to its pricing so far.

It expects to consolidate the Camso acquisition from Q2 FY26 onward. Ceat would pay about 60% of the consideration value of $225 million within a month and the balance over the next one-three years when it is due. Debt is likely to rise to Rs 30 billion by FY26 end from Rs 19 billion currently – after considering the standalone capex of Rs 10 billion.

Ceat’s debt/Ebitda is likely to rise to 2x (current 1.3x) once the Camso acquisition is completed, which is comfortable as per management. Given that tariffs would be levied on all regions, management does not expect a material impact of tariffs on Ceat’s operations, including Camso.

Overall, we expect Ceat to clock a CAGR of ~10%/16%/35% in revenue/Ebitda/PAT over FY25-27E.

We reiterate our Buy rating on the stock with a target price of Rs 4,159 (based on ~18x Jun’27E EPS).

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