CEAT Ltd., a flagship company of the RPG Group, has been making headlines lately with its consistent earnings and sector leadership in the Indian tyre industry. But does it deserve a spot in your portfolio in 2025? Let’s evaluate CEAT using our ultimate 10-point checklist for stock analysis.
CEAT’s Market Performance Today
On April 30, 2025, CEAT Ltd. (NSE: CEATLTD) witnessed a significant surge in its stock price, closing at ₹3,330.0, marking an 8.81% increase from the previous day’s close of ₹3,044.20. This uptick positions it as the top gainer in the BSE’s ‘A’ group for the day.
Why did CEAT Stock surge today?
Several elements contributed to today’s positive market response:
- Robust Q4 Earnings: The company’s ability to achieve record sales and improve margins despite rising raw material costs instilled investor confidence.
- Strategic Acquisitions: CEAT’s acquisition of Camso’s Off-Highway tyre and tracks business from Michelin is expected to bolster its international presence and diversify its product portfolio. Business Today+5mint+5The Economic Times+5
- Dividend Announcement: The declaration of a ₹30 per share dividend signals strong cash flows and a commitment to shareholder returns
Operational Insights
CEAT has been focusing on operational efficiency and cost optimization:
- Cost Management: Effective control over expenses has led to improved margins.
- Product Diversification: The company offers a wide range of tyres catering to various segments, including two-wheelers, passenger cars, and commercial vehicles.
- Technological Advancements: Investments in R&D have resulted in innovative products, enhancing the company’s competitive edge.
1. What Does CEAT Do?
CEAT is one of India’s largest tyre manufacturers, producing tyres for two-wheelers, passenger cars, commercial vehicles, and off-road equipment. With a distribution network of over 4,000 dealers and 34,000 sub-dealers, it exports to over 110 countries. It’s especially dominant in the 2-wheeler tyre segment.
2. Is the Business Model Sustainable?
CEAT operates in a cyclical industry tied to auto demand and raw material prices (rubber, crude derivatives). However, its strong brand recall, OEM partnerships (with Royal Enfield, Hero, etc.), and expansion into premium categories (like radial and EV tyres) add sustainability.
3. How Are the Financials?
- Market Capitalization: ₹12,383 Crore
- P/E Ratio (TTM): 25.71
- EPS (TTM): ₹119.09
- Dividend Yield: 0.98%
- Debt-to-Equity Ratio: 0.49
- Return on Equity (ROE): 10.82%
- Book Value: ₹1,038.43
- Price-to-Book Ratio: 2.95
- 52-Week High/Low: ₹3,581.45 / ₹2,211.00
- Beta: 0.47 www.alphaspread.com+2
4. Is the Stock Undervalued or Overvalued?
| Valuation Metric | CEAT | Sector Median |
|---|---|---|
| P/E | 27.38x | 25x |
| P/B | 3.21x | 2.3x |
| EV/EBITDA | 9.52x | ~9x |
With an average valuation despite strong financials, CEAT appears fairly priced or slightly undervalued.
5. What’s the ROCE and ROE?
- ROCE (FY25): 21.8%
- ROE (FY25): 13.4%
A ROCE above 20% indicates efficient capital usage. However, the ROE is modest and indicates room for improvement.
6. Is There Earnings Growth Momentum?
Yes. Over the last 3 quarters, CEAT has consistently grown EBITDA and PAT. With input costs stabilizing and product mix improving, it is likely to maintain earnings momentum.
7. How Does It Compare to Peers?
| Company | CMP (₹) | P/E | Market Cap (₹ Cr) | ROCE (%) | Net Profit (₹ Cr) | Qtr Sales (₹ Cr) | Sales Growth (%) | Profit Growth (%) |
|---|---|---|---|---|---|---|---|---|
| MRF | 1,35,300 | 32.73 | 57,382.62 | 16.12 | 315.46 | 7,000.82 | 13.60% | -38.11% |
| Balkrishna Inds | 2,679.95 | 29.22 | 51,808.01 | 17.62 | 449.48 | 2,560.33 | 12.57% | 47.17% |
| Apollo Tyres | 474.30 | 22.35 | 30,122.85 | 16.45 | 337.25 | 6,927.95 | 5.04% | -32.88% |
| CEAT | 3,334.75 | 27.38 | 13,489.11 | 15.04 | 98.71 | 3,420.62 | 14.33% | -11.12% |
| JK Tyre | 319.65 | 14.51 | 8,759.02 | 19.31 | 52.60 | 3,673.68 | -0.38% | -71.50% |
| TVS Srichakra | 2,924.00 | 53.28 | 2,239.77 | 11.14 | -6.02 | 802.73 | 11.67% | -112.55% |
| Goodyear India | 908.90 | 45.56 | 2,096.85 | 21.98 | 9.48 | 631.72 | 6.82% | -56.63% |
Key Observations:
Net profit and profit growth are under pressure, similar to others in the industry post-Q4.
CEAT has a moderate valuation (P/E of 27.38) compared to peers like MRF and Balkrishna, while delivering respectable sales growth (14.33%).
Its ROCE (15.04%) is decent, though below Goodyear and JK Tyre.
8. Are Promoters & Institutions Confident?
- Promoter Holding: 46.7%
- FIIs: 22.3%
- DIIs: 16.8%
Stable promoter shareholding and consistent DII interest reflect long-term confidence.
9. Any Red Flags?
- High dependence on crude-linked inputs
- Competitive pricing pressure from unorganized sector and global players
- Low ROE compared to industry leaders
- Moderate dividend yield of ~0.65%
10. What’s the Investment Outlook?
CEAT is at an inflection point:
- EV tyres, premiumization, and exports offer new growth levers
- Improving margin profile and ROCE
- Trading at a reasonable valuation
If you’re seeking a value buy in the auto ancillary space with improving fundamentals and sector tailwinds, it is worth evaluating.
Final Thoughts
CEAT presents an intriguing case in the Indian tyre industry. While the company has shown solid sales growth and maintains a reasonable valuation compared to peers like MRF and Apollo Tyres, it also faces challenges such as declining quarterly profits and moderate return ratios. In a sector where input cost volatility and demand cyclicality play a crucial role, its performance appears steady but not without pressure points.
As always, investors should consider their individual risk appetite, conduct thorough due diligence, and weigh both macroeconomic and company-specific factors before making any investment decisions. This analysis is intended to provide a factual snapshot to support informed evaluation, not as a recommendation to buy or sell.
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Also Read: The Ultimate 10-Point Checklist to Evaluate Any Stock
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