Concall AI

CEAT — Q1 FY27 earnings call

Call held 17 Jul 2026

Management summary

CEAT reported strong revenue growth in Q1 FY27, driven by robust domestic volumes and international business. However, profitability was severely impacted by a sharp escalation in raw material costs, leading to a 575 bps sequential contraction in gross margins. Consolidated PAT plummeted to INR4 crores, also affected by a significant forex loss from Sri Lankan operations and initial losses in the CAMSO business. Management anticipates continued margin pressure and some demand moderation in Q2, despite ongoing price hikes.

Highlights

Standalone revenue grew 18.3% Y-o-Y to INR4,163 crores.
Consolidated revenue grew 22.3% Y-o-Y to INR4,318 crores.
International business grew strongly, almost in the 30s.
Replacement overall volume growth was robust, with healthy double-digit growth in passenger car tyre segments.
OEM demand was robust in some categories, even in the mid-20s, with 2-wheeler and passenger car tyre demand expected to grow in double digits.

Concerns

Sharp escalation in input costs (natural rubber, crude-linked derivatives) led to a 15-16% raw material cost increase Q-o-Q.
Standalone gross margin contracted by 575 basis points Q-o-Q to 33.9%.
Consolidated PAT was INR4 crores, significantly down from INR112 crores last year and INR244 crores in the previous quarter.
INR48 crores impact on finance costs due to Sri Lankan Rupee depreciation on an $80 million denominated debt.
CAMSO business reported negative margins due to initial investments, new warehouses, offices, start-up costs, and new hirings without commensurate revenue growth in Q1.
Margin pressure is expected to continue in Q2, with raw material costs projected to increase by another 8-10%.

Key financials

01 Revenue (Standalone) ₹4,163 Cr +18.2%YoY
02 Revenue (Consolidated) ₹4,318 Cr +22.3%YoY
03 EBITDA (Standalone) ₹380 Cr
04 EBITDA Margin (Standalone) 9.1%
05 EBITDA (Consolidated) ₹370 Cr
06 EBITDA Margin (Consolidated) 8.6%
07 Gross Margin (Standalone) 33.9% -5.8%QoQ
08 PAT (Standalone) ₹98 Cr
09 PAT (Consolidated) ₹4 Cr
10 Consolidated Debt ₹3,243 Cr
11 Consolidated Debt to EBITDA 1.6×
12 Debt to Equity 0.65×

What they filed

Q1 FY27: revenue up 22.4%, net profit down 96.4% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	3,305	3,300	3,421	3,529	3,773 +14%	4,157 +26%	4,219 +23%	4,318 +22%
Expenses	2,942	2,959	3,033	3,142	3,269	3,594	3,626	3,953
EBITDA	362	341	388	387	503 +39%	563 +65%	593 +53%	365 −6%
Margin	11%	10%	11%	11%	13%	14%	14%	8%
Other income	3	3	-33	2	4	-52	16	-1
Interest	66	75	74	82	87	105	85	146
Depreciation	137	141	152	151	174	188	184	186
Profit before tax	162	128	129	156	246 +52%	218 +71%	340 +164%	32 −79%
Tax rate	29%	28%	28%	27%	28%	31%	30%	103%
Net profit	121	97	99	112	186 +53%	155 +60%	244 +147%	4 −96%
EPS	30.13	24.01	24.60	27.69	45.97	38.51	60.32	0.99

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Replacement
— Volume Growth
OEM
— Volume Growth
International Business
— Value Growth
International Business (Standalone)
20% Value Growth
CAMSO Topline (Customer Prices)
10 Mn Revenue

Capital allocation

high confidence

Capex ₹293 Cr this quarter · ₹1,300 Cr (FY27) planned mix of debt and internal accruals
- Capacity-related capex
- Additional 53,000 2-wheeler tyres capacity ₹1,205 Cr
Previously planned ₹1,300 Cr

We spent about INR293 crores of capex in the stand-alone entity during the quarter. We prioritized capacity-related capex over normal routine capex during the quarter 1. Our capacity utilization has remained high on most of the categories across all our plants in quarter 1, and we would continue to invest in adding capacities and scale them up faster to support the demand growth. As shared earlier, we intend to incur capex in the range of INR1,300 crores to INR1,400 crores during FY '27, and we would like to stick to the above plans as of now. We would like to inform you that our Board of Directors in the meeting that we had yesterday approved a capex of about INR1,205 crores for setting up additional 53,000 2-wheeler tyres capacity. This is over and above the additional capacity, which is already under implementation at Nagpur. The company is evaluating various locational options for this additional capacity. We expect this capacity addition to be progressively implemented over by FY '31 in stages. The capex would be funded with a mix of debt and internal accruals as we have been doing in the past.
Debt 1.6× EBITDA
- Forex hedge INR48 crores impact from depreciation in Sri Lankan Rupees on $80 million denominated debt at overseas entity CEAT Sri Lanka OHT ₹48 Cr
- Equity conversion Board approved conversion of part of the $80 million debt into equity for the Sri Lankan entity to adequately capitalize it and reduce interest burden/currency risk. $24.5 Mn
Our consolidated debt stood at INR3,243 crores, an increase of about INR232 crores over quarter 4. Our debt to EBITDA on a consolidated basis stood at a comfortable level of about 1.6x and marginally higher over quarter 4 level of about 1.46x, and our debt-to-equity ratio remained healthy at 0.65x. The Board, in order to ensure that the Sri Lankan entity is adequately capitalized, approved us to convert part of the debt into equity to the extent of about $24.5 million and to ensure that adequate capitalization of the entity at 1:1 debt-equity level.

Guidance & targets

Volume

Replacement demand for MHCV Volume · near term · Medium confidence mid-single digit

In the near term, we expect replacement demand for MHCV to be mid-single digit.

— Arnab Banerjee
2-wheeler growth (replacement) Volume · near term · Medium confidence high single digits

In 2-wheeler growth is expected to be in high single digits, where consumption levels have surpassed already pre-COVID levels.

— Arnab Banerjee
Passenger tyre demand (replacement) Volume · near term · Medium confidence mid-single digit

Passenger tyre demand is expected to be mid-single digit.

— Arnab Banerjee
OEM MHCV growth Volume · Medium confidence mid or high single digit

We expect demand for MHCV to grow in mid or high single digit

— Arnab Banerjee
OEM 2-wheeler and passenger car tyre demand Volume · Medium confidence double digits

while OEM 2-wheeler and passenger car tyre demand is expected to grow in double digits.

— Arnab Banerjee

Raw Material Costs

Increase in Q2 vs Q1 Raw Material Costs · Q2 · High confidence 8-10%

And further spike in the prices of natural rubber and currency depreciation is expected to have an impact of about 8% to 10% in quarter 2 versus quarter 1.

— Kumar Subbiah

Margin

Margin pressure Margin · Q2 · High confidence continue

And as we move forward, in Q2, we expect margin pressure to continue

— Arnab Banerjee

Demand

Demand moderation Demand · Q2 · Medium confidence moderate a little bit

and we expect demand to moderate a little bit. But as I mentioned, it's not going to fall off its cliff.

— Arnab Banerjee

Price Hikes

Additional price hikes (replacement/international) Price Hikes · July and August · High confidence 4-6%

So we will endeavor to take another 4% to 6% through the month of July and August in replacement.

— Arnab Banerjee

Revenue

CAMSO FY28 revenue potential Revenue · FY28 · Medium confidence $120 million

Our current run rate at customer prices is about $10 million which is about $120-odd million. So we would expect to grow it from there in FY '28.

— Arnab Banerjee

Market Share

Premium segment (17-inch+) market saliency Market Share · next 5 years · Medium confidence 30-40%

From 13% today

The market saliency is about 13%, and it will grow to 30-40% in the next 5 years.

— Arnab Banerjee

Capex

FY27 Capex Plan Capex · FY27 · High confidence INR1,300-1,400 crores

I indicated INR1,300 crores to INR1,400 crores capex was our outlook when we had a call a quarter back. And we are holding on to the same as we speak.

— Kumar Subbiah

Operating Expenses

Marketing expense as % of sales Operating Expenses · for the year · High confidence 2.0-2.1%

Our expenses are in the range of 2.0% to 2.1% of sales. So it was slightly higher in quarter 1 because of the spends on IPL that we do. And for the year, it should be around that level.

— Arnab Banerjee

What to watch in Q2 FY27

Raw material cost trajectory

next quarter / H2 FY27

Current Increased 15-16% in Q1, expected 8-10% more in Q2

Target Stabilization or decline in natural rubber and crude prices

Why it matters

Commodity prices are the primary driver of margin pressure; stabilization is crucial for profitability recovery.

Raw material cost increase was about 15% to 16% vis-a-vis the average of last quarter. And moving into quarter 2, despite some recent correction in the crude oil prices, the cost pressure is likely to continue as we do not have the benefit of lower cost raw material inventory in the beginning of the quarter as we had in quarter 1. And further spike in the prices of natural rubber and currency depreciation is expected to have an impact of about 8% to 10% in quarter 2 versus quarter 1.

Risks & concerns

Sharp escalation in input costs
high

Q1 saw a sharp escalation in input costs driven by natural rubber prices and crude-linked derivatives, leading to a 15-16% cost increase.

Management acknowledged
Continued margin pressure in Q2
high

Raw material costs are expected to increase by another 8-10% in Q2, leading to continued margin pressure.

Management acknowledged
Sri Lankan Rupee depreciation impact on finance costs
high

INR48 crores impact on finance costs due to LKR depreciation on $80 million debt, with no hedging mechanism available.

Management acknowledged
El Niño impact on rural demand
medium

El Niño poses a risk to rural demand on account of reduced farm incomes.

Management acknowledged
Supply chain disruptions from West Asia crisis
medium

Supply chain disruptions following the West Asia crisis could impact demand.

Management acknowledged
CAMSO business initial losses
medium

CAMSO business had negative margins in Q1 due to initial investments, start-up costs, and new hirings without immediate revenue growth.

Management acknowledged

Q&A highlights

5 direct

CAMSO Q1 margin and Q2 outlook Direct

Okay Raghu, the margins were negative in quarter 1. And I think Arnab updated in terms of customers are coming to our fold progressively. Okay as of end June, half of the customers have migrated. And by September end, we expect it to be around 90%. So for us to start servicing our customers in different geographies, we had to set up our warehouses, have people in overseas locations like Germany, UK, France, Poland. So we had those infrastructure warehousing related costs. And those costs would be absorbed as we start servicing all our customers from September. Gross margin still looks healthy. And in fact, there's a gross margin differential between CEAT business and CAMSO business. Raghu, what we would request is that give us 1 or 2 more quarters for us to provide more clarity because only half of the customers and that too in the month of June has come. So we have to advance our expenses and in setting up systems for us to meet the requirement locally, it could be supply-chain systems, it could be VAT-related system. Those costs have already accounted and absorbed. So gross margin looks okay. Operating margins were negative. But however, I think in a quarter or 2, things should become normal as there will be a matching revenue.

Clarifies the reasons for CAMSO's negative margin in Q1 (start-up costs, low volumes during transition) and provides a timeline for expected normalization (1-2 quarters) as customer migration completes.

Asked by Raghunandhan NL

Impact of LKR depreciation on finance costs and consolidation Partial

It happens assuming if the currency was rupee, what you said was right. Or assuming if both the currencies had moved in the same proportion, okay, yes, cost in one place would be income in another place at consolidated level, it will get eliminated. But what happened in quarter 1 was the rupee, I'm saying 31st March rupee forex rate because generally, these are booked on the last day of the quarter based on how currency has moved. So it represents the position as on that particular day as on the, which was 30th of June. During the quarter, rupee versus dollar depreciation was small, 30th June versus 31st of March. And so therefore, on the loan given to the subsidiary company, there is no income, there is no appreciation related benefit or the appreciation means dollar appreciating against rupee. Whereas in Sri Lanka, the Lankan rupee went down, that is from LKR310, LKR315 to $1 to around LKR335 to $1. That impact came as a currency impact for the quarter in that entity without a corresponding income in our books, that is in the stand-alone parent company.

Explains why the INR48 crore forex impact from LKR depreciation was a loss for the consolidated entity, despite the loan being from the parent, due to the specific currency movements and lack of hedging for LKR.

Asked by Joseph George

Need for further price hikes and market acceptance Direct

Yes. So as we speak, that 7%, 8% has moved up to 11% already. And you are right in your estimate of about 16%. So we will endeavor to take another 4% to 6% through the month of July and August in replacement. Coming to industry, I really can't predict or say anything on behalf of industry, but so far, the competition has been taking up price hikes in different measures, in different categories, a little bit here and there on dates, but the price table is moving up.

Confirms the need for and ongoing implementation of further price hikes (another 4-6% in July/August) to cover the 16% commodity cost increase, and notes that competitors are also raising prices, indicating market acceptance.

Asked by Raghunandhan NL

Natural rubber price trajectory and impact of Kerala government floor price Direct

Okay, see, largely, Indian prices with a lag is linked to international prices. In a high demand, low inventory situation, local rubber prices would be at a premium. And in a reverse situation, local could be either at parity or a little bit of a discount. So that's what it happens. Today, domestic prices of INR280 is at a premium to the international prices to the extent of about INR20 per kg. So, local prices are largely driven by the international. And because of supply chain-related disruptions, the transit times increased during the intervening period. And therefore, overall inventory level in the pipeline came down, particularly in the physical inventory part of it. And therefore, that would have necessitated the local consumers of natural rubber to approach local market to buy more, and that has caused a little bit of a premium. What we expect the local prices to happen; we expect the local prices to move in tandem with the international prices going forward. The premium could come down once the situation becomes normal.

Explains the current premium of domestic natural rubber prices over international due to demand-supply dynamics and supply chain issues, and expects prices to normalize and align with international trends later in the year.

Asked by Vijay Pandey

Sustainability of high price hikes if commodity prices fall Direct

The price hikes, you know, is lagging the raw material price increases. So the price hikes have to happen first to cover the margin. Our normal gross margins are 40%, 41% in normal times. First quarter saw us going down to 33%. So there is a big gap to be covered. If the raw material prices fall off in second half sometime, we would intend to hold on to the price until we recover to a normal level of operation if we can, given the competitive situation. So that's how it is. The past experience of such situations indicate that the industry holds the price when the raw material tapers off. So what will happen is difficult to predict, but that's what we intend to do.

Management clarifies that current price hikes are compensatory to restore margins to normal levels (40-41% gross margin) from the Q1 low of 33%, and they intend to hold prices if raw material costs fall to recover profitability.

Asked by Basudeb Banerjee

EV revenue share and 17-inch+ tyre market share Direct

In OE, we have an increasing share in excess of 20% and we intend to take it up a little bit higher. It won't go too much higher because of the OE policies. And in replacement, it is more or less indexed to our overall market share. The market saliency is about 13%, and it will grow to 30-40% in the next 5 years.

Provides specific market share figures for premium (17-inch+) tyres in OEM (>20%) and replacement (13%, targeting 30-40% in 5 years), indicating focus on premiumization.

Asked by Kapil Singh

2 min read 6 chapters

Detailed narrative

Q1 FY27 Performance Overview

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.

Input Cost Pressures and Margin Contraction

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.

Profitability Impact and CAMSO Challenges

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.

Demand Outlook and Segment Performance

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.

Capital Expenditure and Debt Management

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.

Strategic Initiatives and International Business

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.

This is an AI-generated summary of a publicly available earnings call transcript.

View original transcript