CEAT shares rally 12% to hit all-time high; brokerages expect EPS to rise. Check fresh targets

Shares of CEAT Ltd surged during the trading session on Monday after the tyre maker announced plans to acquire Camso brand’s off-highway construction equipment tyre. The company announced the same through an exchange filing after the market hours on Friday.
 

CEAT has entered into a definitive agreement to acquire Camso brand’s off-highway construction equipment tyre and track business from Michelin for $225 million. The transaction includes the business with revenues of $213 million in CY23, along with two manufacturing facilities and global ownership of the Camso brand, after an initial 3-year licensing period, said the company.
 

Following the announcement, shares of CEAT soared more than 11.5 per cent to Rs 3449.40, to hit its new 52-week highs, on Monday, commanding a total market capitalisation close to Rs 14,000 crore. The scrip had settled at Rs 3,092.10 in the previous trading session on Friday.
 

Brokerage firms continue to remain positive on the CEAT stock. They see more steam left in it and expect another 15-16 per cent rally in the counter. Analysts are swearing by the positive for the company in terms of EPS appreciation pushed by the acquisition of the business at the attractive valuation and expanding product portfolio.
 

Prima facie, JM Financial sees this deal as strategic positive for CEATs’ long-term goal of expanding its presence in off-highway tyres (OHT) business. Acquisition of Camso’s business is expected to help CEAT widen its product portfolio besides gaining access to global customer base, it said.
 

"While we await more details on business and financial metrics of Camso, our calculations suggest - this acquisition comes at a TTM EV/EBITDA of 7 times and will likely be EPS accretive. We currently have a 'buy' rating on CEAT with target price of Rs 3,500," it added.
 

Investec said that acquisition of Camso brand off-highway construction equipment bias tyre and track biz for $225 million and it will strengthen OHT biz. The brokerage said that it is optimistic on acquisition and believes it is a step in right direction. The stock is trading at P/E of 13.6 times FY26E EPS, it added with a target price of Rs 3,750 and a 'buy' rating.
 

IIFL Securities said that Michelin deal is a good strategic fit and reasonable valuations imply 7-8 per cent EPS accretion in FY26. The brokerage said that it is a good strategic fit and a strong case for re-rating of CEAT stock is being built, it added with a 'buy' rating and a target price of Rs 4,000.
 

On the other hand, Nomura is not very positive on the stock. Attractive valuation can drive up to 10 per cent EPS-accretion and longer term benefit from wider OTH portfolio/exposure and access to Camso’s network, it said with a 'neutral' rating and a target price of Rs 3,051 on CEAT.