CEAT races 16%, hits record on buying Camso brand from Michelin for $225 mn

The northward move in CEAT share price came after it announced that it has acquired Camso brand's Off-Highway construction equipment bias tyre and tracks business from Michelin for $225 million

CEAT share price: Tyre manufacturer CEAT share was buzzing in trade on Monday, December 9, 2024, as the scrip climbed up to 15.82 per cent to hit an all-time high of Rs 3,581.45 per share.

 

The northward move in the CEAT share came after the company announced that it has acquired Camso brand’s Off-Highway construction equipment bias tyre and tracks business from Michelin for $225 million.

 

“The transaction will include the business with revenues of around $213 million for calendar year (CY) 2023 and global ownership of the Camso brand along with two state-of-the-art manufacturing facilities,” CEAT revealed in a statement. 

 

The transaction, meanwhile, is expected to be completed tentatively within 6-9 months, or such period as may be mutually agreed, subject to satisfaction of closing conditions, CEAT said. 

Camso is a premium brand in construction equipment tyre and tracks with strong equity in EU and North American aftermarket and OE segments. The Camso brand will be permanently assigned to CEAT across categories after a 3-year licencing period. 

 

The transaction is expected to expand the company’s (CEAT) product portfolio in the Off-Highway Tyres and tracks segments, which includes agriculture tyres and tracks, harvester tyres and tracks, power sports tracks and material handling tyres. The Business has two manufacturing facilities located in Sri Lanka, CEAT added.  Also Read: We will grow Camso brand in other OHT segments, says CEAT MD & CEO 

Analysts' perspective  Analysts at ICICI Securities highlighted CEAT's strategic focus on expanding its Off-Highway Tyres (OHT) business, which now includes over 900 products and caters to approximately 84 per cent of the agricultural segment's requirements. The acquisition of the Camso brand's Off-Highway construction equipment bias tyres and tracks business presents a major opportunity for CEAT to diversify its portfolio into bias tracks and construction tyres.

 

The acquisition, valued at approximately 1x Price-to-Sales (P/S), is anticipated to enhance margins and earnings for CEAT. While the deal is substantial and expected to nearly double the company’s debt initially, analysts note that leverage will remain within manageable limits of around 2x Debt/Ebitda and 1x Debt-to-Equity.

 

Meanwhile, analysts at Motilal Oswal commend CEAT's strategic efforts to increase its presence in segments such as two-wheelers, passenger vehicles, and off-highway tyres, aiming to boost profitability and reduce dependency on the truck segment. The acquisition is poised to strengthen CEAT's footprint in the global OHT market. 

 

However, the size of the deal is likely to raise the company’s leverage, which stood at 0.45x Debt-to-Equity and 1.2x Debt/Ebitda as of September 2024, especially amid a tepid demand environment across key segments. The stock is currently trading at 17.5x and 13.5x its FY26E and FY27E earnings per share (EPS), respectively, analysts added.

 

About CEAT

 

CEAT, established in 1958, is a leading tyre manufacturer in India and a flagship company of the RPG Group since 1982. Initially founded as Ceat Tyres of India Ltd in collaboration with the Tata Group, CEAT has grown to become one of the fastest-growing tyre companies in the country. 

 

The company produces high-performance tyres catering to a diverse range of vehicles, including two-wheelers, three-wheelers, passenger cars, utility vehicles, commercial vehicles, and off-highway vehicles, manufacturing over 45 million tyres annually. 

 

With a global footprint spanning over 110 countries, CEAT operates six state-of-the-art manufacturing plants located in Nashik, Mumbai, Halol, Ambernath, Chennai, and Nagpur, along with 17 outsourcing units. 

 

CEAT also specialises in producing automotive tyres, tubes, and flaps, delivering excellence in every product.

 

CEAT share price history

 

CEAT shares have gained approximately 17 per cent over the past month, 31 per cent in the last six months, and more than 36 per cent year-to-date (YTD). In contrast, the BSE Sensex has gained about 13 per cent Y-T-D.

 

CEAT is part of the BSE 500 index and has a market capitalisation of Rs 13,476.96 crore, the BSE data showed.

 

At 2:48 PM, CEAT shares were trading 12.37 per cent higher at Rs 3,474.45 per share. In comparison, BSE Sensex was down 0.20 per cent at 81,548.93 levels, while BSE 500 was down 0.12 per cent at 36,635.81 levels.