CEAT: Revenue Up 26%, Net Profit Falls on Raw Material Surge

CEATLTD CEAT ( NSE : CEATLTD) makes tyres for two-wheelers, passenger cars, commercial vehicles and agricultural equipment. It exports to over 110 countries and operates six plants in India. The tyre industry is growing on rising automobile sales, replacement demand and infrastructure activity, with manufacturers shifting toward premium and larger-diameter tyres for SUVs and electric vehicles. What happened: In Q2FY27, consolidated revenue grew 26.2% year on year to Rs 4,762 crore. Volume and realization grew across segments; international business was especially strong. Net profit fell to Rs 112 crore from Rs 186 crore a year earlier as the raw material basket rose by a high single-digit percentage sequentially, compressing EBITDA margins. Why it matters: Raw material cost inflation is the dominant story. CEAT managed other operating costs well but could not fully offset rubber and crude derivative price increases. The board approved Rs 1,205 crore capex in July to add 53,000 units of two-wheeler tyre capacity in stages by FY31, alongside ongoing investments at Nagpur. What I am watching: Capacity utilisation and the pace of raw material cost pass-through. The expansion is funded through debt and internal accruals; management says the balance sheet will stay disciplined. FY26 ROE was 13.8% and operating margin was 13.3%, both below the FY24 peaks of 15.7% and 14.0%. My stance: CEAT's revenue trajectory is healthy but margin recovery depends on input cost stabilisation. The two-wheeler capacity expansion targets a segment with strong domestic demand. At current valuations, the investment case rests on margins recovering toward FY24 levels as raw material pressures ease. I do not hold a position in CEAT at the time of writing. This is not investment advice.