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Published on 17/10/2020 9:53:08 AM | Source: Religare Broking Ltd

Master Pick - Buy CEAT Ltd For Target Rs.1180 By Religare Broking

Posted in Broking Firm Views - Short Term Report| #Ceat Ltd. #Tyres and Tubes Sector #Trading Report #Religare Broking Ltd

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CEAT Ltd

* Established in 1958, CEAT is the flagship company of RPG Enterprises. CEAT is one of India’s leading tyre manufacturers which has strong presence in global markets. CEAT produces over 15 mn tyres a year and offers the widest range of tyres to all segments. It manufactures world-class radials for heavy-duty trucks and buses, light commercial vehicles, earthmovers, forklifts, tractors, trailers, cars, motorcycles and scooters as well as auto-rickshaws.

* CEAT is well established player in the segment with strong product portfolio both in domestic as well as international markets. Its differentiated and high quality products support in earning healthy business from OEMs. However, at present, Auto industry demand has been impacted by Covid-19, however with easing of restriction and opening of economy demand is reviving gradual for 2 wheelers and passenger vehicles with would bode well for CEAT.

* Going forward its focus on growing in 2&3 wheeler, passenger space and truck & bus segment by adding capacity would further benefit in ramping up volumes. Also benign price of raw material (mainly rubber) would aid to earn better margins. Besides higher demand and increasing penetration from rural and market share gain in international business would augur well for the company.

Technical Outlook

* Ceat has been a consistent performer in tyre space. It had a phenomenal run after the breakout in 2013 as it rose from roughly 175 levels and made a record high of 1963 in January 2018.

* Its bullish trend reversed in May 2018 and it traded with negative bias for nearly a year. Though it tried to resume the uptrend multiple times during that phase, it couldn’t surpass the hurdle of the long term moving averages. In line with the broader trend, it also witnessed a sharp fall in March 2020 and made a new 52-week low at 600.

* It has been witnessing recovery for the last seven months and reached again to the resistance zone of the previous swing high i.e. around 1040 levels. Indications are pointing towards marginal consolidation, followed by a breakout. Traders and short-term investors should utilize this phase to accumulate the stock gradually. We advise buying at the current level (992) and adding more on dips around 960 with the close below stop loss of 880 for the target of 1180.

Buy CEAT Ltd @ 960-992 CMP992 SL880 TGT 1180

 

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