Buy Ceat, target price Rs 1860: Motilal Oswal Financial Services

Motilal Oswal Financial Services has buy call on Ceat with a target price of Rs 1860. The current market price of Ceat is Rs 1401.45.

Ceat, incorporated in the year 1958, is a Mid Cap company (having a market cap of Rs 5693.15 Crore) operating in Tyres sector.

Ceat key Products/Revenue Segments include Automobile Tubes, Other Operating Revenue, Scrap, Royalty Income, Others for the year ending 31-Mar-2022.

Financials
For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 2729.22 Crore, down -6.03 % from last quarter Total Income of Rs 2904.25 Crore and up 12.94 % from last year same quarter Total Income of Rs 2416.44 Crore. Company has reported net profit after tax of Rs 41.04 Crore in latest quarter.

The company’s top management includes Mr.H V Goenka, Mr.Atul C Choksey, Mr.Ranjit V Pandit, Mr.Haigreve Khaitan, Mr.Paras K Chowdhary, Mr.Mahesh S Gupta, Mr.Pierre E Cohade, Ms.Priya Nair, Mr.Arnab Banerjee, Mr.Anant Vardhan Goenka, Mr.Vinay Bansal. Company has SRBC & Co LLP as its auditors. As on 31-12-2022, the company has a total of 4 Crore shares outstanding.

Investment Rationale
The company continues to focus on key strategic areas such as PV/2W/OHT (to help margins), along with the expansion in international markets and increasing business inEVs. This, along with prudent capex plans (to benefit FCF), should be a long-term growth catalyst for the company. Valuations at 11.6x/9.2x FY24E/FY25E consolidated EPS do not fully capture the benefits from the new capacities and softening of RM costs. The brokerage reiterates its BUY rating with a TP of Rs 1,860 (based on ~13x Dec-24 EPS).

Promoter/FII Holdings
Promoters held 47.21 per cent stake in the company as of 31-Dec-2022, while FIIs owned 24.09 per cent, DIIs 12.91 per cent.