ICICI Securities has upgraded CEAT to a 'Buy' rating with a target price of ₹4,300. The brokerage expects the company's profit margins to recover as it passes on higher raw material costs through price hikes. Investors should track how successfully the company implements these price increases in a competitive market.
ICICI Securities has upgraded its rating for tire maker CEAT to 'Buy', raising the target price to ₹4,300. This change in outlook follows a period where the company's operating performance in the first quarter of the 2027 financial year fell below some analyst expectations. Despite this recent softness, the brokerage suggests that the company's profit margins have likely reached their lowest point and are expected to trend upward.
To manage the nearly 25% increase in raw material costs observed over the last six months, CEAT has already enacted price hikes of roughly 11% in the domestic replacement tire market. The company is reportedly planning further increases of 4-5% to ensure these rising costs are fully covered. The success of these pricing actions is a primary factor that investors will monitor to see if profit margins can actually improve in the coming quarters.
While the broader tire industry is seeing a cooling trend in tonnage growth, analysts anticipate that CEAT may still outperform many of its peers due to steady gains in market share. The export outlook also provides a mixed but cautiously optimistic picture. While shipments to key regions like the European Union, the United States, and Latin America are showing signs of recovery, the Middle East market, which accounts for approximately 15% of the company's total exports, continues to show weak demand.
The company's performance is also influenced by its international operations, specifically CAMSO, which has acted as a drag on overall margins and earnings per share recently. However, the brokerage maintains a positive long-term view on this segment. Looking ahead, the financial health of the business remains sensitive to volatility in raw material prices, particularly rubber and crude oil derivatives. Investors may follow future quarterly results to assess if the company can successfully offset these costs without sacrificing its volume growth or market share.