Fire at CEAT plant pulls down stock by 5%

CEAT Ltd has plunged nearly 4.6% to Rs 266 levels on the National Stock Exchange (NSE), after a major fire broke out at its tyre manufacturing unit in Nahur, near the north-eastern suburb of Bhandup in Mumbai on Sunday. However, the exact details of damage are unknown.

Reports suggest that the company manufactures around 33% of its total production from this plant.

Meanwhile, the stock has seen an increased appetite among foreign institutional investors (FIIs) who have increased their stake in the company substantially in the October – December period. As per the shareholding pattern as on December 2013, FIIs increased their stake in the tyre-maker to 8.22% from 0.03% as at the end of September 2013.

“CEAT is well positioned to grab the growing market opportunities by leveraging on its key strengths – diverse product portfolio, increased network, operational efficiency, focus on exports and high margins yielding segment (Passenger cars, Utility vehicles and two wheelers),” a recent note from Nirmal Bang Securities said while commenting on the December quarter results.

“We have seen a sharp run up in the stock in the last one year (+210%) reducing the valuation gap between itself and peer group. A further up move from current levels will depend on improvement in demand scenario,” it adds.

We maintain our ‘Buy’ rating on the stock with target price of Rs 324, said Angel Broking in a morning note on Monday.