Multi bagger recommendation - Ceat

PowerYourTrade.com also for investors Not everyone in the market "trades" everyday. Some people invest for the long term and they are constantly sniffing around for those potential multi baggers. Ask an Infosys investor, he will tell you that ONE stock can change a person's life!!! We believe that enduring wealth can be built only by investments that gain steadily and safely. MULTI BAGGERS is where our top market experts give you ONE solid investment idea EVERY WEEK. Each a potential multi bagger according to them. Who knows which one will make you a millionaire?? To get exclusive Multibagger recommendations every week Click here Multi Bagger: Ceat Recommended Price Rs 176.70 India Infoline Report Dated: Sep 10, 2007 Ceat, a diversified tyre major, is ramping up its production facilities to benefit from the uptrend in tyre offtake. It has planned to modernize its existing facilities and double its Off The Road (OTR) capacity, which will boost volumes in FY08 and FY09. The proposed sale of land at its Bhandup facility and relocating out of Mumbai is expected to boost its capex plans and increase margins. Ceat is planning to invest in a CV radial tyre facility over the next two years. It is expected to invest over Rs 500 crore in the next 2-3 years to ramp up its capacities. It plans to increase truck & bus radial sales from 600-700 tyres per month to 4,000-5,000 by June 2008 through its existing arrangement with Pirelli and outsourcing from China. We recommend a BUY with a target of Rs 230. Company Background Ceat is present in commercial vehicles (CV), passenger car radials, two-wheeler, tractor, OTR and others segments.   Past Multi Baggers Recommendations Stock Reco Price Peak after reco %Gain Balasore Alloys 6 51 748 TRF 240 1115 364 Opto Circuits 119 493 316 Hind Zinc 288 1119 289 Elecon Eng 173 666 284 Aptech 121 379 213 Mangalam Cement 86 259 201 Vakrangee 100 305 205 Reliance Infra 330 944 186 GMR Infra 360 968 169 Click for all Multi Bagger recommendations Subscribe Now Its popular brands include LUG and RIB in T&B and LCV segments, SAMRAAT in Tractor, ENDURA in PV segment and SECURA in two-wheeler segment. It has a total capacity of 385 tons per day (tpd) at two plants in Maharashtra. It sources two-wheeler tyres from private players. Fall in raw material costs boosts EBIDTA margin: Tyre business is raw material intensive. Natural rubber prices were on a downward trend for the past 6 months and are expected to continue to slide in the coming quarters. In Q1FY08, fall in natural rubber prices and stable crude-based raw material prices boosted EBIDTA margin by 550 bps to 9.2%. Apart from this, Ceat's hedging policy for raw materials has shown good results in the past few quarters. Benchmark rubber price is hovering around Rs 88 per kg at present with year to date average at Rs 85 per kg. Average natural rubber price for Ceat in FY07 stood at Rs 97 per kg. Tyre demand robust with buoyancy in replacement market Tyre demand growth, including exports, for June 2007 quarter in the country stood at 6.4% with strong replacement market (RM) demand. RM demand increased by 10.4%, compensating flat growth in original equipment manufacturers (OEM) demand. Exports continued to show strong growth at 8.7%. With the Indian economy growing at over 9%, tyre demand is expected to remain strong. Subscription Rates   3 years       Rs. 5400     2 years       Rs. 4200     1 years       Rs. 2600     6 months       Rs. 1499     3 months       Rs. 999     1 month       Rs. 499   Get   20% discount  on Online Subscriptions Click Here Attractive valuations The buoyancy in automobile sector and stability in raw material prices with a negative bias is expected to benefit Ceat. The company has planned to de-merge its investment portfolio into a separate company. Per share value of investment at current prices stands at Rs 98. We have valued Ceat at 10x of its FY09E EPS of Rs19.8 and assigned Rs 32 for its investment portfolio. Our sum of parts value for Ceat comes to Rs 230. We recommend BUY Disclaimer: This report is for information purposes only and does not construe to be any investment, legal or taxation advice. It is not intended as an offer or solicitation for the purchase and sale of any financial instrument. Any action taken by you on the basis of the information contained herein is your responsibility alone and India Infoline Ltd (hereinafter referred as IIL) and its subsidiaries or its employees or directors, associates will not be liable in any manner for the consequences of such action taken by you. We have exercised due diligence in checking the correctness and authenticity of the information contained herein, but do not represent that it is accurate or complete. IIL or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to a ny person from any inadvertent error in the information contained in this publication. The recipients of this report should rely on their own investigations. IIL and/or its subsidiaries and/or directors, employees or associates may have interests or positions, financial or otherwise in the securities mentioned in this report..    This is a sample report. 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