ICICI Securities has maintained a 'buy' rating on tire maker CEAT with a target price of ₹4,500, citing the company's ability to pass on rising commodity costs. The report highlights that successful price hikes in the replacement market and expected export recovery are key to balancing current margin pressures from its CAMSO division and raw material inflation.
ICICI Securities has released a report maintaining a 'buy' rating on CEAT, with a target share price of ₹4,500. This update follows the company’s recent performance, where it navigated significant increases in raw material costs, which rose by approximately 27% over the last six months. The brokerage firm noted that the company’s ability to implement a 13% price increase in the domestic replacement market has been a crucial factor in protecting its profit margins.
The tire industry is highly sensitive to the cost of raw materials like natural rubber and crude oil derivatives. For investors, the main takeaway is the company’s ability to shift these rising costs to customers without losing significant demand. This pricing power is often a sign of brand strength in the replacement market, where individual buyers choose products based on quality and price rather than just OEM (original equipment manufacturer) tie-ups.
While the company has shown resilience in its core business, its operational performance includes challenges within its CAMSO unit. This division, which focuses on off-highway tires, continues to weigh on the company’s overall profit margins and earnings per share. However, the brokerage report views this drag as a temporary hurdle rather than a long-term failure, suggesting that the broader business momentum remains intact.
Looking ahead, the recovery in export markets is expected to provide a tailwind for volume growth. The tire sector remains cyclical and capital-intensive, meaning investors usually monitor how companies balance capacity expansion with debt levels and cash flow. CEAT, like its peers in the Indian tire industry, operates in a competitive environment against established players such as MRF, Apollo Tyres, and JK Tyre. Success in the coming quarters will likely depend on whether the company can sustain its market share gains while effectively managing the drag from its off-highway tire segment.
The target price of ₹4,500 is based on the brokerage's valuation projections for September 2028. Investors tracking the stock may look for future updates regarding raw material price stability, the margin contribution from the CAMSO unit, and whether export volume growth meets the company’s expectations.