CEAT shares hit record high as brokerages give thumbs up to Camso's Off-Highway Tyre acquisition- Grow Mudra

CEAT shares hit record high as brokerages give thumbs up to Camso's Off-Highway Tyre acquisition

09 Dec , 2024 By : Debdeep Gupta

Shares of CEAT rose 9 per cent to hit a fresh record high of Rs 3,370 on December 9 after the company announced it has entered into definitive agreements with Michelin to buy Camso brand’s Off-Highway construction equipment bias tyre and tracks business in an all-cash deal valued at about $225 million.

This will expand CEAT’s product portfolio in the high-margin Off-Highway Tyres (OHT) and tracks segments, which include agriculture tyres and tracks, harvester tyres and tracks, power sports tracks and material handling tyres.

Following this, a host of brokerages issued bullish calls on the stock and raised the price target suggesting that the move bodes well for the RPG group company.

Axis Capital retains a 'buy' rating with a target price of Rs 3,450, a possible upside of 11 per cent from the last closing price of Rs 3,086. The brokerage notes that the acquisition, executed at approximately a 1x price-to-sales multiple, seems reasonably priced. While the move aligns with CEAT’s focus on high-margin segments, Axis cautions that the integration could be challenging and might put pressure on the balance sheet.

IIFL has reiterated its 'buy' rating with a higher target price of Rs 4,000. The brokerage considers the acquisition a good strategic fit and expects it to be EPS accretive, contributing a 7-8 per cent rise by FY26. IIFL sees reasonable valuations and believes the deal strengthens the case for re-rating CEAT’s stock.

Investec also maintains a 'buy' rating on CEAT with a target price of Rs 3,750. The brokerage is optimistic about the recent acquisition, viewing it as a strategic step to accelerate growth in the speciality tyre segment. Given its strong growth potential, CEAT remains Investec’s preferred pick in the tyre sector.

In Q2, CEAR reported a 41.5 per cent year-on-year drop in consolidated net profit to Rs 121.5 crore. In comparison, the company had posted a profit of Rs 207.7 crore in the previous year. The company reported revenue from operations at Rs 3,304.5 crore, an 8.2 per cent increase from the previous year's Rs 3,053 crore.

At about 9:20 am, shares of the company were trading at Rs 3,334, higher by 7.8 per cent from the last close on the NSE. CEAT shares have rallied 28 per cent since the start of the year.