CEAT profit falls 40% as input costs rise

CEAT Limited (NSE: CEATLTD) reported Q2 FY27 consolidated net profit of ₹112 crore, down approximately 40% year-on-year. Revenue increased 26.2% to ₹4,762 crore, but elevated raw-material costs weighed on profitability. The divergence between revenue and profit growth is the central takeaway. CEAT is generating substantially higher sales, but the additional revenue is not translating into proportionate earnings. Raw materials account for a significant portion of tyre manufacturing costs. Higher prices for key inputs can compress margins before a company has sufficient time to implement price increases across its product portfolio. CEAT's management has indicated that commodity-cost pressures could persist into Q3 FY27. The company is responding through calibrated price increases, cost controls and a focus on premium products. This creates a timing challenge. Price increases can protect margins, but their effectiveness depends on competitive conditions and whether customers continue buying at higher prices. The company has also invested approximately ₹490 crore in capacity expansion. That investment may support future growth, but higher capital expenditure and borrowing requirements increase the importance of cash generation while margins remain under pressure. My view: CEAT's revenue growth indicates that demand remains healthy, but the profit decline shows that demand alone is not enough to protect earnings. I would look for evidence that pricing actions are catching up with input-cost inflation before assuming that profitability will recover quickly. What I am watching next: - Q3 FY27 EBITDA margin and raw-material costs. - Whether price increases offset cost inflation without hurting volumes. - Debt and cash flow following the recent capacity expenditure. Stance: Neutral to cautiously constructive. Revenue momentum is positive, but a sustained recovery in margins is needed before taking a stronger view on earnings.