Ceat signs JV with a Bangladesh firm - Angel Broking

Ceat has signed a joint venture (JV) agreement with A K Khan and Company, a Bangladesh based business house, to set up a bias tyre manufacturing facility in Bangladesh. The plant is expected to manufacture bias tyres in truck, light commercial vehicle, and two-wheeler segments for the local Bangladesh market.

The JV which would entail an investment of US$67mn (Rs.355cr) towards the new plant is expected to commence operations by the end of 2014. The plant is expected to have an installed capacity of 110MT/day and is likely to be completed in phases. As per the agreement, while Ceat will hold 70% in the JV Company, balance 30% will be held by A K Khan and Company. Further, Ceat will also provide technology and operational support to the JV Company. Around Rs.40-Rs.50cr of Ceat's planned capital expenditure towards the new plant will be incurred in FY2013E and the remaining will be incurred in FY2014E. The announcement by the company is on the expected lines as it had already announced its intentions of setting up a manufacturing facility in Bangladesh.

At Rs.105, the stock is trading at attractive valuations of 2.6x FY2014E earnings. We maintain our Buy rating on the stock with a target price of Rs.163.

Source : Equity Bulls

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