CEAT shares downgraded, target cut on cost pressures post Q4

Revenue rose 23% year-on-year to ₹4,219 crore from ₹3,421 crore, while EBITDA jumping 52% to ₹598 crore from ₹394 crore. This translated into a margin expansion to 14.2% from 11.5% a year ago.

Gross margins also strengthened on a yearly basis, coming in at 39.7% compared to 37.5% last year, although they saw a marginal contraction of 26 basis points sequentially.

The raw material basket remained largely stable on a quarter-on-quarter basis. Volume growth remained healthy across segments, led by strong traction in OEM and international markets, while the replacement segment remained largely flat.

Realisations were broadly unchanged sequentially and saw a marginal uptick on a yearly basis.

Nomura has maintained a “buy” rating on the stock with a price target of ₹4,276. The brokerage said that strong growth could support a gradual pass-through of costs, although margins are likely to remain under pressure in the near term.

It has raised revenue estimates by 8–9%, but cut EBITDA margin projections to 10.5% for FY27 and 12.1% for FY28. This has resulted in EBITDA estimate cuts of 16% and 3%, along with EPS downgrades of 30% and 8% for FY27F and FY28F, respectively.

Meanwhile, several brokerages have turned more cautious and downgraded the stock. ICICI Securities has downgraded CEAT to “hold” from “buy” and cut its price target to ₹3,850 from ₹4,450. IIFL Institutional Equities has lowered its rating to “reduce” from “add”, trimming the target to ₹3,200 from ₹3,550. Axis Capital has also downgraded the stock to “reduce” from “add” with a revised target of ₹3,500, down from ₹4,250.

Among others, Emkay Global Financial Services has cut its rating to “reduce” from “buy” and slashed the price target to ₹3,600 from ₹4,800. Nuvama Institutional Equities has downgraded the stock to “hold” from “buy”, lowering its target to ₹3,900 from ₹4,500. Equirus Securities has also moved to a “reduce” rating from “add” and cut its price target to ₹3,499 from ₹4,108.

Trading activity in the stock picked up sharply, with around 15 lakh shares changing hands in the first two hours, significantly higher than the 20-day average of about 35,000 shares for that time of day.

Delivery volumes were also elevated, with around 18% of traded shares marked for delivery by 11 am.