Ceat Q1 Results Review - Demand Outlook Remains Healthy: Motilal Oswal

Motilal Oswal Report

Ceat Ltd.’s Q1 FY25 performance was in line with our estimates. Revenue grew 9% YoY, driven by strong growth in replacement and exports. Profit after tax growth was muted at 3% YoY due to:

1. a 5% QoQ rise in input costs,

2. a price hike in replacement in the middle of Q1 and the lagged impact of OE and export pass-through, and

3. an adverse mix.

While the demand outlook remains healthy, margins are likely to be under pressure given rising input costs.

Ceat’s focus on strategic areas such as passenger vehicles/two-wheelers/off-highway tyre/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 17.5 times/14 times FY25E/FY26E consolidated earnings per share appear attractive. Hence, we reiterate our Buy rating on the stock with a target price of Rs 3,090 (based on ~15 times June-26E EPS).

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