CEAT Q3 beats estimates; Nuvama retains Buy, sees 21% upside potential

Nuvama Institutional Equities said CEAT Ltd posted a strong operational performance in the December quarter of FY26, leading the domestic brokerage to reiterate its positive view on the stock. It said the tyre maker's Q3 results marked an "all-round beat," supported by robust revenue growth and margin expansion.

According to Nuvama, CEAT's Q3 FY26 revenue rose 26 per cent year-on-year (YoY) to Rs 4,160 crore, exceeding estimates. The outperformance was driven by higher-than-expected demand in the replacement segment and export sales.

EBITDA jumped 65 per cent YoY to Rs 560 crore, again surpassing expectations, aided by the revenue beat.

Regarding Camso integration, Nuvama noted that the process is still at an early stage. The business is currently operating through a sale agreement with Michelin, with full integration expected over the next three to five quarters. The brokerage added that once integration is complete, margins are likely to expand to mid-teen levels.

Looking ahead, Nuvama expects CEAT to deliver a revenue and EBITDA compounded annual growth rate (CAGR) of 11 per cent and 14 per cent, respectively, over FY26–28E. This growth is projected to be supported by expansion in the company's existing business as well as contributions from the Camso acquisition.

The brokerage highlighted that CEAT's net debt is expected to moderate to around Rs 2,000 crore by FY28E, from elevated levels of about Rs 2,900 crore following the Camso buyout.

Nuvama maintained its 'Buy' recommendation on the stock with an unchanged target price of Rs 4,500, valuing the company at 16 times its estimated FY28 earnings per share.

Meanwhile, CEAT shares declined 4.35 per cent on Tuesday to close at Rs 3,712.65. At this level, Nuvama's target price implies an upside potential of 21.21 per cent.