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ICICI Securities Report
Ceat Ltd.'s Q3 FY24 Ebitda margin at 14.1% was down ~90 basis points QoQ (versus consensus 13.8%) due to ~200 bps lower gross margin. The contraction in gross margin was due to raw material cost increase (plus 2.5% QoQ) and price cuts in international markets. Ceat expects slower original equipment manufacturer growth in FY25 due to high base effect but better growth in replacement and exports.
It aims to double exports revenue in next three years to 25% (versus 18% currently). We raise our FY24E/FY25E earning per share by ~10%/20% to account for margin improvement, driven by visibility of benign raw material cost benefits percolating into FY25.
Maintain 'Sell' with a revised discounted cash flow -based target price of Rs 2,047 (from Rs 1,616), implying ~15 times FY26E earnings.
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