CEAT margin recovers sequentially but remains 3.74 points below year-ago
Revenue grew +26.22% YoY, but costs grew faster; lower sequential interest and tax rates drove the sharp profit recovery.
Filed 14 Oct 2026, 18:22 IST · after market close · CEAT Ltd (CEATLTD)
Key takeaways
- Consolidated operating margin narrowed 3.74 percentage points YoY as expenses rose +31.68% against revenue growth of +26.22%.
- Sequential margin improved 1.15 percentage points, while a 57.48 percentage-point tax-rate drop and 40.41% lower interest helped lift profit before tax to Rs 164 cr from Rs 37 cr.
- Management attributed the YoY EBITDA margin contraction to raw-material pressure while reporting quarterly capex of Rs 493 cr and a debt-to-equity ratio of 0.77x.
Price around the results
Revenue growth did not convert into operating profit
CEAT's consolidated revenue grew +26.22% YoY, but operating profit fell -9.21% because expenses increased faster at +31.68%. Net profit declined -39.69% YoY to Rs 112 cr, with other income acting as a drag at -7.93% of profit before tax. Sequentially, revenue rose +10.28% and operating profit increased +25.21%, helped by lower interest costs and the tax rate falling 57.48 percentage points.
Raw-material pressure kept margins below last year's level
Management said the YoY EBITDA margin contraction was primarily due to raw-material cost pressure. Sequentially, expenses grew +8.90% against revenue growth of +10.28%, allowing operating margin to improve 1.15 percentage points to 9.60%. That margin was 1.38 percentage points above the 8.22% median for the four Consumer Discretionary peers that had reported.
Margin recovered from Q1 but remains below the FY26 peak
Operating margin moved up from 8.45% in Q1FY27 but remained below 14.05% in Q4FY26 and 13.34% in Q2FY26. Management said international business grew on both a sequential and YoY basis. The company reported Rs 493 cr of quarterly capex, while net working capital increased by about Rs 258 cr QoQ and debt-to-equity rose to 0.77x from 0.65x.
No immediate market reaction after the post-close filing
The results were filed after market close, so there was no immediate market reaction to report. After the last eight results, the stock rose three times and fell five times, with a median absolute move of 3.08%.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹4,762 cr | ₹4,318 cr | +10.28% | +26.22% |
| Other income | ₹-13 cr | ₹4 cr | — | — |
| Expenses | ₹4,305 cr | ₹3,953 cr | +8.90% | +31.68% |
| Operating profit | ₹457 cr | ₹365 cr | +25.21% | -9.21% |
| Operating margin (%) | 9.60% | 8.45% | — | — |
| Interest | ₹87 cr | ₹146 cr | -40.41% | +0.05% |
| Depreciation | ₹193 cr | ₹186 cr | +3.76% | +11.02% |
| Profit before tax | ₹164 cr | ₹37 cr | +343.24% | -35.35% |
| Tax | ₹52 cr | ₹33 cr | +57.58% | -23.47% |
| Net profit | ₹112 cr | ₹4 cr | +2700.00% | -39.69% |
| EPS (₹) | ₹27.79 | ₹1.07 | +2497.20% | -39.56% |
Operating margin of 9.60% compares with a Consumer Discretionary sector median of 8.22% across 4 peers that have reported Q2FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- International Business grew robustly on both quarter-on-quarter and year-on-year bases.
Expansion
- Capex outflow for the quarter was approximately Rs. 493 crore.
New products
- CEAT launched the sustainable passenger car tyre Circl 90 in India.
New initiatives
- CEAT optimized inbound logistics for domestic non-NR raw materials to 38.8 KM/MT.
- Alternate-fuel road transportation of raw material was initiated by two suppliers.
Problems & risks
- Year-on-year EBITDA margin contraction was primarily driven by raw-material cost pressure.
- Net working capital increased quarter on quarter by approximately Rs. 258 crore.
- The debt-to-equity ratio increased to 0.77x from 0.65x in Q1 FY27.
What to watch
- Whether operating margin holds above 9.60% while raw-material pressure remains a reported issue.
- Whether net working capital reverses the Rs 258 cr QoQ increase and debt-to-equity moves from 0.77x.
- Whether quarterly capex remains near the reported Rs 493 cr level.