CEAT shares can rally 16%, says Nuvama Institutional Equities: Here’s why

Shares of CEAT Ltd will be in focus on Monday, September 8, after Nuvama Institutional Equities upgraded the counter to buy from hold, citing earnings visibility from its recent Camso acquisition.

With a price target of Rs 3,900, the domestic brokerage forecasts an upside potential of over 16% from the last closing price of Rs 3,353 per share on the NSE. CEAT shares have rallied 30% in the last six months.

Nuvama expects the tyre marker’s revenue and profit growth to accelerate over FY25–28, driven by its core business and the addition of Camso, a global player in off-highway tyres and tracks that CEAT acquired from Michelin for $225 million. Camso brings a revenue run rate of $130–150 million at 50% utilisation, and margins that could expand from low teens to around 20% in the medium term.

“Camso’s market share in compact construction premium tracks is 20% while it is 10% in the overall segment. The acquisition would also include global ownership of the Camso brand along with two manufacturing facilities,” Nuvama said in a note dated September 5.

Post-acquisition, CEAT’s share of high-margin off-highway tyres and international business is projected to rise to 21% and 25%, respectively, from 15% and 19% earlier. Nuvama forecasts a 12% revenue CAGR and 19% EBITDA CAGR over FY25–28, supported by replacement demand, OEM sales, exports, and the Camso integration.

Net debt is projected to climb to Rs 29,000 crore in FY26 following the Camso acquisition, but Nuvama expects it to ease by FY28 on the back of stronger cash flows.

Nuvama cautioned that risks to its outlook include a potential slowdown in domestic and overseas markets that could weigh on revenues, rising competitive pressures that may hurt profitability, adverse currency movements, and higher commodity prices that could squeeze margins.

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