With returns of over 650 percent in the last 10 years, CEAT has been a true multi-bagger and an investor favourite. But, CEAT share price has corrected almost 13 percent in the last one year, under-performing the Sensex by over 28 percent.

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Sensex gave returns of over 15 percent during the period. The multi-bagger small-cap tyre stock, however, looks set for a fresh round of rally with brokerage firm Motilal Oswal raising its target price on CEAT by over 23 percent to Rs 1,250 per share on hopes of faster revenue growth in FY21-22.

Shares of CEAT quoted at Rs 1002.85 apiece on BSE, up 0.49 percent. The stock opened at the day's high of Rs 1010, after Monday's close of Rs 997.9.

"With initial signs of stability in OEM volumes, low base in replacement business and new capacities, CEAT should see faster revenue growth in FY21-22. This coupled with benign natural rubber prices should aid strong EPS growth. Valuations at 14.2x/10.7xFY21/22E consol. EPS doesn't fully capture the benefit of substantial capactity addition. Maintain Buy with TP of ~INR1,250 (~14xDec'21 consol. EPS)," Motilal Oswal said in a report on January 23.

The brokerage said CEAT's third quarter operating performance was expectedly good, driven by the benefit of rubber prices even as its flat profit growth was the result of overheads and interest/depreciation of the new TBR plant. The full cost of the new plant will reflect in 1HFY21, benefit of the new capacities will be seen in the profit and loss only in the second half of the next fiscal, it said.

CEAT posted a marginal 0.2 percent rise in its consolidated profit at Rs 52.5 crore in the third quarter ended December 31, 2019. On a consolidated basis, the company's revenue rose 4.2 percent at Rs 1,762 crore during the quarter as against Rs 1,729.5 crore in the corresponding quarter last year.

Commenting on results as well as the outlook of the business, Anant Goenka, Managing Director, CEAT Limited said in an exchange filing that, “The company has performed well despite challenging business environment. We will be commissioning our Chennai & Nagpur plants in the fourth quarter and with the new capacities coming in, we are looking forward to growing the passenger segments.”

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