Motilal Oswal Maintains Buy Rating for CEAT, Targets Rs 4228
Motilal Oswal Reiterates BUY Rating on CEAT Amidst Near-Term Margin Pressure
In a recent meeting with the CEAT management at the annual RPG Conference on 26th May'26, the company outlined a comprehensive roadmap for the integration of Camso, highlighting key growth drivers and the potential for the business to achieve 20-25% EBITDA margin over the coming years.
The Indian market is currently witnessing healthy demand across various segments, but this is expected to moderate in the near term due to sharp price hikes aimed at offsetting rising input costs. Replacement demand is forecasted to grow at a single-digit rate for TBR (Total Bias Ratio) tires, 3-5% for PCR (Passenger Car Radial) tires, and high single digits for scooter tires in FY27.
A sharp 15-20% quarterly increase in raw material prices is anticipated in 1Q, with CEAT having already taken a 5% price hike. Despite this, an under-recovery of 5% remains, which is likely to keep near-term margins under pressure.
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Despite near-term concerns, long-term integration benefits from Camso are expected to offset margin pressure. Motilal Oswal expects CEAT to achieve a compound annual growth rate (CAGR) of approximately 11% in revenue, 12% in EBITDA, and 13% in PAT (Profit After Tax) over FY26-28.
| Segment | Forecasted Growth Rate |
|---|---|
| TBR (Total Bias Ratio) | Single-digit growth |
| PCR (Passenger Car Radial) | 3-5% growth |
| Scooters | High single-digit growth |
Motilal Oswal reiterates its BUY rating on CEAT with a target price of INR4,228, based on a price-to-earnings ratio of ~18x for FY28E EPS (Earnings Per Share).
Investor Takeaway
Investors should expect CEAT to clock a CAGR of ~11%/12%/13% in revenue/EBITDA/PAT over FY26-28.
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