CEAT

CEAT reported strong standalone revenue growth of 18.3% year-on-year, reaching INR4,163 crores, with consolidated revenue growing 22.3% to INR4,318 crores. This growth was fueled by robust domestic volumes, particularly in replacement segments, and a strong international business which grew almost 30%. Standalone EBITDA stood at INR380 crores, translating to a 9.1% margin, while consolidated EBITDA was INR370 crores at an 8.6% margin.

The quarter was significantly impacted by a sharp escalation in input costs, with raw material prices, including natural rubber and crude-linked derivatives, increasing by 15-16% sequentially. This led to a substantial contraction in standalone gross margin by 575 basis points to 33.9%. Management has implemented price increases of approximately 11% in replacement markets by July and plans further 4-6% hikes in July and August to mitigate these cost pressures, which are expected to continue into Q2 with another 8-10% increase in raw material costs.

Consolidated Profit After Tax (PAT) plummeted to INR4 crores, a sharp decline from INR112 crores in the prior year and INR244 crores in the previous quarter. This was primarily due to the raw material cost inflation, a nearly INR48 crores impact from Sri Lankan Rupee depreciation on an $80 million debt, and negative margins in the CAMSO business. CAMSO's losses stemmed from initial investments in new warehouses, offices, start-up costs, and new hirings during its customer transition phase, with normalization expected in 1-2 quarters.

Domestic volumes were boosted by structural consumption tailwinds. Replacement demand for MHCV is expected to be mid-single digit, 2-wheelers in high single digits, and passenger tyres in mid-single digits. OEM segments showed robust demand, with MHCV projected to grow mid to high single digits, and 2-wheeler and passenger car tyres in double digits. While some moderation in demand is anticipated in Q2 due to El Niño risks and geopolitical issues, management does not expect a significant downturn.

CEAT spent INR293 crores on capex in Q1, prioritizing capacity expansion. The FY27 capex plan remains unchanged at INR1,300-1,400 crores. The board approved an additional INR1,205 crores for 53,000 2-wheeler tyre capacity, to be implemented by FY31 and funded by debt and internal accruals. Consolidated debt increased to INR3,243 crores, with a net debt to EBITDA ratio of 1.6x. To address the Sri Lankan entity's debt, the board approved converting $24.5 million of the $80 million loan from the parent into equity to reduce interest burden and currency risk.

CEAT continues its focus on electrification, holding a 25% share in OEM passenger and 2-wheeler EVs. Premiumization efforts are yielding results, with 17-inch plus rim size tyre sales growing 100% in replacement. The company is also scaling digital and AI initiatives across the enterprise. International business, including CAMSO, grew approximately 23% (20% standalone), despite Middle East disruptions, with a robust order base and new SKU additions.