Broker’s call: Ceat (Accumulate)

Target: INR 2,285

CMP: INR 2077.15

corpse Hosted the annual investor meeting to highlight the strategic roadmap. Management emphasized its focus on increasing market share across key segments and export markets as well as improving margin and return ratios.

Some of the key points are as follows: CEAT leads the way in the 2W segment, with a market share of 28 percent (26 percent in FY19). And to gain a larger share, it may leverage its existing 2W network to increase reach into the premium motorcycle segment. CEAT has a 40 percent stake in the business with 2W EV OEMs.

Ceat is increasing OHT capacity from 60-70 TPD to 105TPD/150TPD in H1FY24/FY24 end. Total installed OHT capacity will be at 300TPD, which includes 150TPD Bhandup bias frame capacity (converted to OHT).

Ceat has committed total capital of Rs. 7-750 crores for FY24 (Rs. 500-550 crores on project capex; Rs. 150-200 crores on maintenance), mainly towards OHT Tires at Ambernath and PCR at Chennai and Nagpur.

Management expects first-quarter EBITDA margin to be weak due to an RM cost increase of 1-2 percent over the prior quarter and higher marketing spend due to IPL-related expenses.

The RM stable basket will be the main driver. With capex intensity behind, expect cumulative FCF generation of Rs.2,170 crore in FY24-26E. Given the recent 20 percent rise in the share price in the last 50 days, we recommend accumulating from buying and