CEAT Q1 FY27 Earnings Call: Guides Margin Pressure to Continue in Q2, Approves Rs 1,205 Cr Capacity Expansion (CEATLTD)

CompoundingAI Research Published July 17, 2026 6 min read

CEAT Ltd held its Q1 FY27 earnings call on July 16, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Revenue growth of 18% offset by sharp margin compression

Standalone revenue of Rs.4,163 Cr — up 18.2% YoY and 3.2% QoQ, with two-thirds of YoY growth from volumes and one-third from price/mix.
Consolidated revenue of Rs.4,318 Cr — up 22.3% YoY, driven by broad-based volume growth across segments.
Standalone EBITDA of Rs.386 Cr — margin of 9.1%, down from Rs.587 Cr in Q4 FY 2025-2026, reflecting the impact of raw material cost inflation.
Consolidated EBITDA of Rs.370 Cr — margin of 8.6%, contracting 562 bps sequentially and 238 bps YoY, with gross margin declining 575 bps QoQ to 33.9%.
Standalone PAT of Rs.98 Cr — vs Rs.283 Cr in Q4 FY 2025-2026 and Rs.135 Cr in Q1 FY 2025-2026, after Rs.7 Cr exceptional cost for VRS.
Consolidated PAT of just Rs.4 Cr — impacted by ~Rs.48 Cr forex loss on Sri Lankan rupee depreciation and higher startup costs at Camso.

Gross margin contracted 575 bps QoQ to 33.9% — well below the normal 40-41% range, as raw material costs surged 16-18% in Q1 FY27 vs Q4 FY 2025-2026.
Domestic natural rubber hit Rs.280/kg — a 15-year high, with a Rs.15-20/kg premium over international prices; management cited a "government floor price" of ~Rs.250/kg as a potential correction level in Q3/Q4 FY27.
Rupee weakened to ~96.5/USD — from 93-94/USD in Q4 FY 2025-2026, adding to import cost pressure; procurement mix is ~two-thirds international block rubber and ~one-third domestic sheet.
Price hikes of ~11% taken in Q1 FY27 — comprising 7-8% in replacement, 3-4% in OEM, and 4-5% in international; a double-digit OEM hike was effective 1 July 2026, with additional 4-6% planned in July-August in replacement.
Cumulative hikes of 15-16% over 4 months — still lagging raw material increases; management flagged that Q2 FY27 carries an additional 8-10% cost pressure vs Q1, driven by natural rubber and currency.
Q2 FY27 outlook: margin pressure to continue — demand expected to moderate but not "fall off a cliff"; management expects commodity price stabilization once the West Asia war ends, potentially in H2 FY27.
Management intends to hold prices if the commodity basket stabilizes or turns favorable in H2 FY27, aiming to recover normal margins "subject to competitive dynamics".

Domestic replacement grew mid-teens — OEM low-teens, and international business grew ~30% in Q1 FY27, with volume growth across two-wheeler, truck bus radials, farm, and passenger car tires.
Revenue mix: international ~20%, replacement 50%, OEM 30% — product-wise mix similar to the annual report, with two-wheeler capacity at Nagpur at ~1,00,000 tires per day.
EV OEM market share maintained at ~25% — in both passenger EVs and two-wheeler EVs, with OE market share for >17-inch and EV segments "in excess of 20%".
17-inch+ premium tire sales grew 100% — in the replacement channel in Q1 FY27, highlighting the company's mix upgrade trajectory.
Replacement market share at ~13% — management expects growth to "30–40% over the next five years", indexed to the company's overall market position.
US tariffs of "25% on auto components + 4% base = 29%" — apply to on-road tires (TBR, PCR); off-highway tires attract a 10% global tariff, with the same rate for Sri Lanka exports.

Camso revenue run rate ~$10M/month — at customer prices; management maintained the top-line guidance of Rs.1,000-1,200 Cr for the business.
60% of customers transitioned from Michelin — by end of Q1 FY27, with full customer transition expected by end of Q2 FY27; ~90% migration targeted by September 2026.
Full value-chain control targeted by Q4 FY 2025-2026 — as stated in the source, with FY 2027-2028 (FY28) expected to be the first full year of end-to-end control.
EBITDA margins negative in Q1 FY27 — due to one-time costs for warehousing, hiring, and system setup; normalization expected within 1-2 quarters (by late Q2-Q3 FY27).
Margin recovery anticipated in H2 FY27 — as direct servicing and replacement growth improve; OEM recovery will take longer, requiring new product development.
Board approved conversion of USD 24.5M of Sri Lankan debt — ~30% of the $80M related-party loan, into equity to achieve 1:1 debt-equity capitalization; interest rate on the loan is ~8%.

Q1 FY27 capex of Rs.293 Cr — standalone; FY27 capex guidance maintained at Rs.1,300-1,400 Cr, including the new capacity project.
Board approved additional Rs.1,205 Cr — for 53,000 two-wheeler tire capacity, to be "implemented progressively by FY 2030-2031".
Consolidated debt of Rs.3,243 Cr — up Rs.232 Cr QoQ; debt/EBITDA at 1.6x and debt/equity at 0.65x, with India Ratings reaffirming "AA with positive outlook".
One-time MTM loss of Rs.42-48 Cr — from Sri Lankan rupee depreciation (LKR from 312-315 to 335 vs USD) in Q1 FY27; no offsetting gain at the parent level.
Excluding forex, quarterly finance cost expected at Rs.100-110 Cr — for Q2 and Q3 FY27, with debt levels increasing marginally (within ~5%) at the consolidated level, assuming stable interest rates.
Management flagged currency depreciation risk on the Sri Lankan loan and plans to mitigate; the Lankan rupee cannot be hedged against the dollar.

Q2 FY27: additional 8-10% cost pressure vs Q1 — driven by natural rubber spike and currency depreciation, despite some crude oil correction; demand expected to moderate but not sharply.
Management intends to hold prices if commodity basket stabilizes — aiming to recover normal margins in H2 FY27, subject to competitive dynamics; no rollback of price hikes is considered at this time.
Domestic natural rubber correction to ~Rs.250/kg may occur in Q3/Q4 FY27 — management cited the "government floor price" as a potential level, though it declined to comment on the floor's sustainability.
FY27 capex guidance maintained at Rs.1,300-1,400 Cr — with the impact of the new two-wheeler capacity project not significant in the current year.
Camso margin recovery in H2 FY27 — with FY 2027-2028 (FY28) expected to be the first full year of value-chain control; quarterly finance cost expected at Rs.100-110 Cr.
US tariffs of 29% on on-road tires and 10% on off-highway tires — remain a headwind; management noted that off-highway tires from Sri Lanka face the same 10% global tariff rate.