Anand Rathi Maintains 'Hold' Call on Ceat, Target Price Rs 3850

Ceat Delivers Strong Q4FY26 Results, Maintains Market Share Lead

Anand Rathi's research report highlights Ceat's impressive performance in Q4FY26, with consolidated EBITDA growing by 53% year-over-year (y/y) to Rs5.93 billion. This significant increase is attributed to effective control of operating expenses. Ceat's demand outlook for original equipment manufacturer (OEM), export, and replacement volume appears healthy, but a potential price hike could impact demand in the future.

The company has continued its market share gain in the aftermarket and OEM segments, driven by superior products, marketing strategies, and capacity expansion. However, steep inflationary pressures are expected in Q1FY27e, with a 15-20% increase in the raw material (RM) basket, primarily due to higher crude and rubber prices. In response, Ceat has undertaken a ~5% hike in aftermarket prices by April 26 to mitigate the impact.

Market Outlook and Risks

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The next set of price hikes will be crucial, and their timing will depend on competition actions and the demand scenario. A key risk for Ceat is a lower-than-expected price hike, which could affect its profitability. The company's gross margin is expected to contract by ~270bps over FY26-28e compared to Q4FY26 levels, primarily due to partial cost pass-through.

Rating and Target Price

Anand Rathi maintains a HOLD rating on Ceat with a revised target price of Rs3,850 (down from Rs4,400 earlier), valuing the stock at 16x consolidated earnings per share (EPS). This revised target price reflects the company's solid performance and market share gains, while also accounting for the anticipated inflationary pressures and potential risks.

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Note: The YoY growth percentage is calculated based on the provided data.