Ceat, a leading tyre manufacturer, is in a strong position to capitalize on the growing market demand despite facing challenges from rising raw material costs. The company is expected to see high single to early double digit volume growth in FY25, driven by its focus on high-margin segments such as exports, high rim size passenger car radials (PCR), and off-highway tyres (OHT).
The company’s export business is a key growth driver, with new SKUs being launched for various tyre categories in key markets like Europe and the US. Ceat is also expected to benefit from consistent price hikes and a recent correction in raw material prices, which should support margins from Q4-FY25 onwards.
Analysts have projected a solid revenue, EBITDA, and adjusted PAT CAGR of around 13/12/10 percent for FY24-27. While there may be some volatility in natural rubber (NR) prices, a favorable product mix should help offset some of the impact on earnings.
From a valuation perspective, Ceat’s stock seems reasonably priced at 19x/13.6x FY26/17 consolidated EPS, compared to a 10-year historical average of around 18.6x. The current price target of ₹3,651 reflects the company’s improved positioning and growth prospects.
Investors should keep an eye on Ceat’s ability to sustain price hikes and manage NR price volatility, as these factors will have a significant impact on the company’s margins going forward. Overall, Ceat presents a compelling investment opportunity for those looking to capitalize on the growth potential of the tyre industry.
