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Motilal Oswal Report
Ceat Ltd. hosted the investing community, followed by a plant visit to its Halol facility and an the overview of its research and development center. The company showcased its R&D capabilities (including its design studio capabilities, tyre performance evaluation) through which it aims to explore incremental business avenues such as exports (scale international business to Rs 35 billion) and electric vehicles (new product launches and increasing share in premium segment).
Moreover, Ceat indicated its improved efficiency at its Halol plant, as overall energy cost fell by 15% due to digitisation and ~22% including productivity.
The company continues to focus on key strategic areas such as passenger vehicle/two-wheeler/off-highway tyres (to help margins), along with the expansion in international markets and increasing business in EVs. This, along with prudent capex plans (to benefit free cash flow), should be a long-term growth catalyst for the company.
Valuations at 11.6 times/9.2 times FY24E/FY25E consolidated earnings per share do not fully capture the benefits from the new capacities and softening of raw material costs.
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