Favorable tax reforms, rising EV adoption, and ongoing premiumization trends are expected to drive healthy single-digit growth in India's tyre market in the near term.
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Nirmal Bang Report
Ceat Ltd. remains our preferred structural play in the tyre sector, supported by its leadership in two-wheelers, growing presence in premium categories such as SUVs and 150cc+ motorcycles, and expanding global footprint following the CAMSO acquisition.
Favorable tax reforms, rising EV adoption, and ongoing premiumization trends are expected to drive healthy single-digit growth in India's tyre market in the near term.
We build in volume growth of 9% CAGR over FY25-27E led by increasing traction in the passenger car radial OEM business, exports, and the off-highway trye segment.
We maintain Buy on Ceat and roll over the target price to Rs 4,545 valuing it at 17x Sep-27EPS.
We have raised our FY26 estimates to factor in stronger than expected volume growth across segments and improved margins driven by a softer raw material basket.
Ceat's calibrated investment in expanding premium 21-inch PCUV radial capacity/Camso acquisition is unlikely to have a significant impact on ROCE or ROE, given its disciplined capex approach and focus on maintaining healthy return ratios.
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