CEAT (CEATLTD)

FairStock Score: 61/100 — STEADY

Score breakdown: P/E: 1/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Established brand with promoter holding of 47.21%, aligning owner interests.
• Consistent growth: 5-year revenue CAGR of 11.68% and latest quarter sales of ₹4,157 Cr.
• Healthy balance sheet with debt/equity of 0.68, Piotroski F-Score of 8/9, and Altman Z of 3.02.
• Reasonable profitability with ROE of 12.67% and ROCE of 15.40%.
• Positive free cash flow of ₹170 Cr despite capex-heavy tyre business.

Concerns

• Expensive valuation: P/E of 22.93, P/B of 3.43, and EV/EBITDA of 88.75.
• Price of ₹3,706.60 is far above Graham Number of ₹1,822.63 and DCF intrinsic value of ₹2,243.56, giving negative margin of safety.
• Free cash flow of ₹170 Cr appears weak versus market cap of ₹14,285 Cr and quarterly profit of ₹155 Cr.
• Sales growth of 16.35% is outpacing profit growth of 14.94%, signalling possible margin pressure.

AI Analysis

Let me look at CEAT as a business first. It is an established tyre maker with a promoter holding of 47.21%, so owner interests are reasonably aligned. Over five years revenue has compounded at 11.68%, and the latest quarter shows sales of ₹4,157 Cr, so the franchise has a growth engine. Profit growth is 14.94%, while return on equity is 12.67% and return on capital employed is 15.40%. Those are respectable, though not extraordinary. The balance sheet is conservative: debt-to-equity is 0.68, and the Piotroski score of 8/9 plus Altman Z of 3.02 suggest financial distress is not a near-term worry. Free cash flow, however, is only ₹170 Cr, which is thin against the market cap of ₹14,285 Cr and even the quarterly profit of ₹155 Cr. That makes me question earnings quality. Now comes the hard part: valuation. At ₹3,706.60, the P/E is 22.93, price-to-book is 3.43 against a book value of ₹1,079.98, and EV/EBITDA is 88.75. Graham’s number is ₹1,822.63 and the DCF value is ₹2,243.56 — both far below the current price. There is no margin of safety; in fact, it is deeply negative at -93.75%. The dividend yield of 0.85% offers little comfort. I do not deny the business quality; the FairStock score of 61 calls it steady. But a good business can be a poor investment at the wrong price. At this valuation, CEAT is a fine company selling above my assessment of worth. I would wait for either a material pullback or several years of earnings growth to catch up before committing capital.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer