Tyre Sector Stock To Buy For The Target Price Of Rs. 1,630: Motilal Oswal

In the latest report of Motilal Oswal, a leading brokerage firm in India has given a buy call for a mid-cap stock in the tyre sector. The brokerage firm is highly bullish on CEAT Ltd and has given the stock a target price of Rs. 1,630.

The stock is on a clear uptrend and has given a strong momentum to the upside in recent trading sessions. The price of CEAT is very at its all-time highs; however, the latest report of Motilal Oswal suggests the stock has the potential to go more than 8% to the upside from the current market price.

Outlook of CEAT Ltd.

CEAT Ltd is a multinational tyre manufacturing company, one of India's largest tyre manufacturing companies. The company was first established in 1924 in Turin, Italy, and since then, it has had a presence in the global markets.

The stock's current market price is Rs. 1,502 with a market capitalization of Rs. 6 077 Crores. The stock's all-time high is Rs. 1,507, and the all-time low is Rs. 890. The stock is trading at its all-time highs currently.

Buy Call Of Motilal Oswal On CEAT Ltd

According to the latest report of Motilal Oswal, 'Recovery in demand and easing of commodity prices will drive a strong recovery from 2HFY23. Valuations, at 40.3x/13x FY23E/FY24E, consolidated EPS, do not fully capture the ramp-up of new capacities and stabilization in RM cost. We maintain our Buy rating with a target price of INR1,630 (based on ~13x Sep '24 EPS).'
The brokerage firm suggests significant growth in revenue for the upcoming years. The report mentioned 'Expanded capacity can deliver a revenue of INR130b' as the headline to summarise the analysis.

Key takeaways from the company management Interaction of Motilal Oswal

Below are some of the key takeaway for the interaction of the company management and brokerage firm as mentioned in the latest report of Motilal Oswal,
• 'Demand is stable on an MoM basis. OEMs are recovering well; replacement demand is stable, but exports are under pressure. While replacement demand in rural India remains weak (due to weak demand for Tractors and Motorcycles), the same in urban markets remains fine. T&B replacement demand is stable.
• Weakness in exports is primarily in two markets: a) EU (due to macro concerns), and b) Indonesia (on account of import quotas). The OTR segment remains unaffected.
• Electric Vehicle(EV) tyres will need to address: a) greater wear and tear (due to higher weight and torque), b) lower noise, and c) rolling resistance (to improve the battery range). CEAT's market share in e-2W tyres (OEM) stands at 50% v/s 30% in ICE 2Ws. It has already launched EV tyres for all three segments.
• It is looking to narrow the gap in EBITDA margin v/s its peers (~2.5pp in FY22) over the next five years, driven by: a) a mix, b) operating leverage, and c) narrowing of the pricing gap in the Truck segment.'