Emkay Global has reiterated its BUY recommendation on CEAT, setting a 12-month target price of Rs 4,100, representing a 12.2% potential upside from current levels. Following the company's annual analyst meeting, the brokerage remains bullish on CEAT’s structural strengths, international aspirations, and resilient pricing strategy. The delay in expected margin expansion until the second half of FY25, however, tempers short-term enthusiasm. Still, the acquisition of CAMSO and rising share in OEM segments bolster the long-term growth story.

Resilient Growth Outlook Supported by Rural Strength and Product Diversification

Replacement demand holds steady, rural outpaces urban:
CEAT’s management reaffirmed mid-single-digit replacement growth guidance. The rural segment, accounting for 50% of CEAT’s 2-wheeler volume, is outpacing urban due to a favorable monsoon forecast. Scooters are outperforming motorcycles, adding another tailwind to CEAT’s dominant 36% 2W market share.

Targeting OEM dominance in passenger vehicles:
CEAT is actively chasing market share in the PV OEM space, setting its sights on capturing 27% share by FY27, up from the current 12%. This is supported by the increasing popularity of 17-inch+ rim-size tyres, where CEAT is aggressively ramping up.

CAMSO Acquisition: A Game-Changer with Rs 10,000+ Crore Market Opportunity

USD1.2 billion addressable market unlocked:
The CAMSO acquisition is a strategic masterstroke. With Michelin set to exit over the next three years, CEAT will assume full brand control, opening a door to a USD1.2 billion high-margin market. In FY26 alone, revenue from this unit is expected to hit €130–140 million.

Price reset, efficiency gains on the horizon:
CEAT plans to reverse Michelin’s FY23 price hikes and realign with FY22 levels, targeting value recovery and customer retention. An estimated Rs 25–30 million will be deployed over two years to upgrade manufacturing capacity and reduce dependence on Michelin's systems.

Margin expansion expected in 2–4 quarters:
The management anticipates margin accretion through operational synergies, RM sourcing efficiencies, and leaner cost structures. The strategic pivot to route European demand via CAMSO and US demand via India also helps sidestep protectionist tariffs on Sri Lankan and Indian exports.

Competitive Pricing Strategy to Sustain Market Position

Market-sensitive pricing maintained:
In the Passenger Car Radial (PCR) category, CEAT prices slightly below market leaders, helping it remain competitive. Its pricing in TBR is aligned with peers, while in the 2W segment, it leads both in market share and pricing control.

Raw material outlook stabilizes in Q1 and Q2:
Contrary to previous expectations of relief starting in Q2, the RM cost environment appears flat in the near term. Any substantial margin upside is now likely to materialize only in the second half of FY25, contingent on softening commodity prices.

Segmental Performance: Rising Tide Across Categories

Segmental revenue contribution shows strong momentum:
The Passenger Vehicle and 2W segments together form over 48% of FY25 estimated revenue, with YoY growth projections of 16% and 10.7%, respectively. Truck & Bus Radials (TBR) and Off-Highway Tyres (OHT) continue to see niche market gains.

Valuation and Financial Metrics: Room for Multiple Re-rating

Stable revenue growth and improved margins in FY26:
Emkay projects CEAT’s consolidated revenue to grow at a 12% CAGR over FY25–27. EBITDA is set to expand at a 23% CAGR, and EPS at 36% over the same period, pointing toward a strong earnings recovery.

Improved capital efficiency and lower leverage:
Return on Equity (RoE) is forecasted to rise from 11.9% in FY25 to 17.3% in FY27. Net debt is expected to fall below Rs 14,000 million by FY27, driving the Net Debt/EBITDA ratio down to a comfortable 0.6x.

Stock Performance and Technical Levels

Current market price: Rs 3,653
CEAT has witnessed a 52.6% rally over the last 12 months, outperforming the Nifty by over 44.7%. With Emkay’s target price of Rs 4,100, the stock offers a further upside of 12.2%.

Technical Support and Resistance Levels:

Immediate Support: Rs 3,480

Key Resistance: Rs 3,950

52-week Range: Rs 2,274 – Rs 4,044

Bottomline: Solid Fundamentals Back Long-Term Investment Case

CEAT's forward-looking strategy — bolstered by the CAMSO acquisition, strong rural traction, competitive pricing, and a pivot to high-margin categories — positions it as a compelling play in India’s auto ancillary sector. While near-term margin expansion may be deferred, the structural narrative remains intact. Long-term investors with a medium-risk appetite may consider accumulating the stock around support levels, with a 12-month price target of Rs 4,100 firmly in sight.