CEAT begins commercial production at Tamil Nadu plant; stocks rise 2%

3 minutes of reading Last update: 11 Sep 2024 | 14:02 IST

The share price of CEAT, an Indian tyre manufacturing company, rose 2.1 per cent intraday to hit a high of Rs 2,904.85 per share today, September 11, 2024. The share price of CEAT rose after the company announced the commencement of commercial production of truck and bus radial (TBR) tyres at its plant in Kancheepuram, Tamil Nadu.

At around 1:28 PM, CEAT shares were up 1.60 per cent at Rs 2,889.25 per share. In comparison, the BSE Sensex was up 64.91 points at 81,986.2.

“We hereby inform you that our company’s plant(s) at Kancheepuram in Tamil Nadu has commenced commercial production of Truck and Bus Radial (TBR) tyres today,” the letter reads.

According to the documents, the plant’s production capacity is expected to be gradually increased to 1,500 tires per day over the next 12 months.

Emkay Global, on September 3, initiated coverage on CEAT with a ‘Buy’ rating. The brokerage house gave a target price of Rs 3,650 per share.

Emkay is bullish on CEAT due to its best-in-class research and development (R&D), industry-leading marketing spend and focus on original equipment manufacturer relationships.

Moreover, as per the report, CEAT has outperformed on metrics over the last five years, taking the lead in consumer categories. CEAT is said to be more resilient to raw material volatility than its competitors.

“Price hikes, accelerating growth and continued high asset utilisation are expected to drive margins back to FY2024 levels (30% CAGR EPS over FY2025-2027), with a return on capital employed (RoCE) of 19%,” Emkay said.

Earlier on June 7, brokerage firm Nuvama Institutional Equities had maintained a ‘Buy’ rating on CEAT with an unchanged target price of Rs 3,000 per share. Nuvama Institutional Equities has a positive outlook for the company and believes that return on equity (RoE) will remain at a healthy 16 per cent plus in FY2025-26.

“We are building a compound annual growth rate of revenues/earnings (CAGR of 9%/11% in fiscal years 2024-2026), supported by growth in the OEM, replacement and export segments,” the report reads.

Further, taking into account input costs and extended producer responsibility (EPR) expenses, we have assumed an earnings before interest, taxes, depreciation, and amortization (EBITDA) CAGR of 6 percent during fiscal 2024-26. However, debt reduction should support an earnings per share (EPS) CAGR of 11 percent,” the report said.

Over the past year, CEAT shares have gained 29.4 per cent, while the BSE Sensex index has risen 22 per cent.

First published: 11 Sep 2024 | 14:02 IST