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Motilal Oswal Report
Ceat Ltd. has guided for double-digit volume growth in both replacement and export segments. It also expects OE demand to pick up in H2, led by new model wins and higher share of business in passenger vehicles/two-wheelers/commercial vehicles.
However, given the rising cost pressure, we have lowered our FY25/FY26 EPS estimate by 9% each.
Ceat's focus on strategic areas such as PVs/2Ws/off-highway tyres/exports (to help margins), along with prudent capex plans (to benefit free cash flow), should continue to improve its returns in the long run.
Valuations at 22.5x/16.8x FY25E/FY26E consolidated EPS appear reasonable. We reiterate our Buy rating on the stock with a target price of Rs 3,450 (based on ~17 times Sep'26E earnings per share).
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