CEAT margin drops to 9.13% as costs outpace revenue growth
Raw-material cost pressure drove the margin contraction, while the stock's five-session fall was much larger than its usual post-results move.
Filed 16 Jul 2026, 19:30 IST · after market close · CEAT Ltd (CEATLTD)
Key takeaways
- Standalone revenue grew 18.24% year-on-year, but expenses rose 20.88%, reducing operating margin by 1.98 percentage points to 9.13%.
- Net profit fell 27.60% year-on-year as higher interest costs and weaker operating profit outweighed the 0.74-percentage-point increase in the tax rate.
- The stock fell 7.30% initially and 13.08% by the fifth session, well beyond its 3.08% median move after the past eight results.
Price around the results
Revenue growth did not translate into operating profit
CEAT's standalone revenue grew 18.24% year-on-year, and management said volumes increased across segments. Expenses grew faster at 20.88%, so operating profit declined 2.83% and operating margin narrowed by 1.98 percentage points. Sequentially, revenue rose 3.15% but expenses increased 9.70%, driving a sharper 5.42-percentage-point margin contraction.
Raw-material costs were the stated margin pressure
Management said raw-material cost pressure was the primary reason for the EBITDA margin contraction on both a sequential and year-on-year basis. Interest costs also rose 15.80% year-on-year and 10.71% sequentially, adding pressure below operating profit. Other income fell 71.63% sequentially and contributed 11.36% of profit before tax, making reported profit quality weaker than operating earnings alone suggest.
Margin reversed after three quarters of improvement
Operating margin had risen from 11.11% in Q1FY26 to 13.69% in Q2FY26, 14.08% in Q3FY26 and 14.55% in Q4FY26 before falling to 9.13% this quarter. The current margin was 5.41 percentage points below the 14.54% median for 26 Consumer Discretionary peers that had reported. Net profit declined 65.44% sequentially, with the comparison also affected by Q4FY26's other income of Rs 52.87 crore.
Capex and working capital moved higher
Management reported capex outflow of approximately Rs 293 crore during the quarter. The company also said net working capital increased sequentially by approximately Rs 138 crore. CEAT's Head Office and three plants received ISO 27001 certification, which management described as a step toward stronger information security and data protection.
The market reaction was unusually negative for CEAT
The stock fell 7.30% initially and was down 11.03% after one session and 13.08% after five sessions. That compares with a 3.08% median absolute move after the company's past eight results, during which the stock rose three times and fell five times. The five-session relative performance was -11.81%.
Q1FY27 at a glance
Standalone figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹4,163 cr | ₹4,036 cr | +3.15% | +18.24% |
| Other income | ₹15 cr | ₹53 cr | -71.63% | -34.09% |
| Expenses | ₹3,783 cr | ₹3,449 cr | +9.70% | +20.88% |
| Operating profit | ₹380 cr | ₹587 cr | -35.29% | -2.83% |
| Operating margin (%) | 9.13% | 14.55% | — | — |
| Interest | ₹95 cr | ₹86 cr | +10.71% | +15.80% |
| Depreciation | ₹168 cr | ₹171 cr | -1.96% | +11.07% |
| Profit before tax | ₹132 cr | ₹383 cr | -65.53% | -26.87% |
| Tax | ₹34 cr | ₹99 cr | -65.81% | -24.71% |
| Net profit | ₹98 cr | ₹284 cr | -65.44% | -27.60% |
| EPS (₹) | ₹24.41 | ₹70.29 | -65.27% | -27.05% |
Operating margin of 9.13% compares with a Consumer Discretionary sector median of 14.54% across 26 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -7.30% | -8.39% |
| Next session | -11.03% | — |
| 5 sessions | -13.08% | -11.81% |
Volume on the results session was 7.09× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- The company reported healthy year-on-year volume growth across segments.
Expansion
- Capex outflow for the quarter was approximately Rs. 293 crore.
New initiatives
- CEAT's Head Office and three plants received ISO 27001 certification to strengthen information security and data protection.
Problems & risks
- Net working capital increased sequentially by approximately Rs. 138 crore.
- EBITDA margin contraction was primarily driven by raw-material cost pressure.
What to watch
- Whether operating margin recovers from 9.13% after the raw-material cost pressure cited by management.
- Whether quarterly capex remains near the Rs 293 crore reported this quarter.
- Whether net working capital reverses the sequential increase of approximately Rs 138 crore.