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Motilal Oswal Report
Ceat Ltd. has guided for double-digit volume growth in the replacement category for FY25, driven by two-wheelers and passenger cars. The company intensifies its focus on expanding in export markets.
A stable growth outlook for domestic OEMs and a healthy growth in replacement demand will enable a faster absorption of new capacities and drive operating leverage benefits.
Ceat’s focus on strategic areas such as passenger vehicle/two-wheeler/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 15.3 times/12.6 times FY25E/FY26E consolidated earnings per share, also appear attractive. Hence, we reiterate our Buy rating on the stock with a target price of Rs 2,930 (based on ~15 times March-26E EPS).
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