Ceat - Growth To Be Driven By Digitisation, Advanced Manufacturing: Motilal Oswal

Motilal Oswal Report

Ceat Ltd. hosted the investing community, followed by a plant visit to its Chennai facility showcasing its factory, which is focused on digitisation and advanced manufacturing processes.

Following these practices, original equipment manufacturer approvals from this new plant have now dropped to 25 months (versus five years from a new greenfield capacity).

The company continues to focus on key strategic areas such as passenger vehicle/two-wheeler/off-highway tyre (to help margins), along with the expansion in international markets and increasing business in electric vehicles.

This, along with prudent capex plans (to benefit free cash flow), should be a long-term growth catalyst for the company.

Valuations at 16.6 times/15.3 times FY24E/FY25E consolidated earning per share do not fully capture the benefits from the new capacities and softening of raw material costs.

We reiterate our 'Buy' rating with a target price of Rs 3,290 (roll forward to ~15 times FY26E earnings per share).

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