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Multi Baggers

Hem Securities

5.30 AM Jan 1st 1970

Ceat

BSE ID : 500878     NSE ID : CEATLTD

RECOMMENDED PRICE 107.75

PEAK FROM RECO 2640.00 2,350.12%

CURRENT PRICE 2677.75 Resource id #18

Ceat is India's leading tyre company with over 50 years of presence. We initiate a 'BUY' on the stock with a target price of Rs 140 with the medium to long term investment horizon.

Ceat

Ceat is India's leading tyre company with over 50 years of presence. It is ranked as no. 1 player in Sri Lanka in terms of market share.

The company has posted decent numbers for the quarter ending March 2013. The Revenues from operations on consolidated basis increased by around 6% at Rs.1345.70 crores vs Rs.1273.25 crores y-o-y. Operating profit remained flat on a yearly basis whereas it jumped 30.57% at about Rs.144.52 crores as against Rs.110.68 crores in the previous quarter. On the raw material side primarily rubber prices have come down. They have come down from about Rs 165-170 per kilogram in Q3 to about Rs 155-160 per kilogram in Q4. That is a drop of about 6-7 percent quarter on quarter (QoQ). The company has reported 32.83% rise in its net profit at Rs.64.90 crore for the quarter as compared to Rs.48.86 crore. EPS for the quarter stood at Rs.18.95.

The company's share of business in the replacement market is at about 55%, about 22-23 percent is in the exports and about 22-23 percent is in the OEM segment. Volumes grew by 11% sequentially with exports and OE registering a volume growth of 17% quarter on quarter. And the replacement segment grew by 6% q-o-q. While volume registered growth; the net impact due to price mix was around negative 2% on account of some pricing action during the quarter in the replacement and OE segments. The company continued its thrust on Motorcycle and SUV tyre advertising campaigns.

Valuation

With increasing market presence, new product launches, ramping of production facilities and improving operation performance; Ceat's revenue visibility looks promising. We believe Ceat Ltd. is trading at an attractive valuation at 2.22x and 1.80x of FY14EPS of Rs.48.57 and FY15EPS of Rs.59.77. We initiate a 'BUY' on the stock with a target price of Rs.140 (appreciation of about 30%) with the medium to long term investment horizon.

For full details, Click on the attachment

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advise. Reader is requested to rely on his own decision and may take independent professional advise before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used the information prior to, or immediately following the publication.

Ceat_HemSec_Multibagger.pdf

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