Ceat Ltd. share price target

CEAT’s Q2FY27 operating performance was in line with our estimates. Our view on a gradual recovery in margins from Q2, has started materialising.

CEAT’s 2Q consolidated earnings of INR1.2b were above our estimates due to a 110bp QoQ EBITDA margin expansion. This improvement was aided mainly by price hikes and operating cost reduction despite RM pressure.

CEAT’s Q1FY27 operating performance was below our estimate. Nevertheless, we believe its margins have bottomed out and could gradually improve hereon.

CEAT’s 1QFY27 consolidated earnings of INR40m were far below our estimate of INR502m due to significantly higher-than-expected interest costs, despite margins coming in line with our expectations.

We met with the CEAT management at the annual RPG Conference on 26th May’26. The company outlined a roadmap for Camso integration, highlighting key growth drivers and the potential for the business to achieve 20-25% EBITDA margin over the coming years.

Consolidated EBITDA grew by 53% y/y to Rs5.93bn in Q4FY26 (vs. our estimate of Rs5.58bn), led by effective control of opex. Whilst the demand outlook for OEM, export and replacement volume (standalone) appears to
be healthy, price hike could affect demand, going forward.

We downgrade CEAT to REDUCE from Buy while cutting our target price by ~27% to Rs3,600 from Rs4,900, valuing the stock at 20x Mar-28E EPS. CEAT posted a strong Q4, with revenue growth of 18% YoY driven by healthy traction across the replacement, OEM, and international segments.

CEAT’s 4QFY26 adjusted PAT was higher than our estimate at INR2.5b, largely on account of higher other income, even as operational performance was in line with our estimates.

Adjusting for a one-time extraordinary expense, CEAT’s 3QFY26 earnings came in line with estimates at INR1.96b. Healthy volume growth across segments, coupled with stable commodity prices, drove margin beat at 13.6%.

Healthy traction in replacement business, strong underlying OE volumes and recovery in exports drove double-digit revenue growth for CEAT in Q3FY26 (+3% I-Sec est.).

We recommend a BUY on the stock with a target price of Rs 4,140/share, implying an upside of 10% from the CMP.

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We attended CEAT’s analyst meeting on developments in the Camso acquisition. The acquisition (not built in) is in line with CEAT’s capital allocation priorities and supports its 3 growth pillars – premiumization, globalization, higher margin OHT.

In a deal valued at ~USD 225mn, CEAT has completed its acquisition of the CAMSO brand’s off-highway construction equipment-bias tyre and tracks business from Michelin.

Healthy traction in the OE business and steady replacement demand (led by 2W/TBR segment) drove growth for CEAT in Q1FY26.

CEAT logged a healthy Q1 with 10.5% revenue growth led by 9%/1.5% volume/realization growth; overall vol growth was driven by a mid-20s/singledigit growth in OEM/replacement; realization was mostly muted due to headwinds for international business.

CEAT’s Q1FY26 earnings stood at INR1.15b, below our estimate of INR1.5b, impacted by lower-than-expected margins, higher interest costs, and lower other income.

We met CEAT management at the RPG Conference on 3rd Jun’25. In India business, management continues to expect good demand in the tractor and 2W replacement segments even as 2W OEM demand is now slowing down.

We recently attended CEAT’s Investor Day to understand its medium-term growth strategy. Over the next two years, CEAT aims to gain leadership position in the PV replacement segment (currently, no. 3 player with 16% market share); it is also targeting ~200bps of market share expansion in the TBR segment.