CEAT Ltd Quarterly Results Q2 FY 26 stock analysis

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Sector Outlook: Positive

Topline growth remains healthy; Margins beat expectations

CEAT Limited reported a strong performance in Q2 FY26, with revenue rising to ₹3,772.7 crore — up 14.2% year-on-year and 6.9% quarter-on-quarter — exceeding market expectations of ₹3,660 crore. The growth was driven by steady demand across OEM and international markets, supported by a healthier product mix and stable replacement demand after GST normalization. Gross profit increased by 24.9% YoY to ₹1,544 crore, with margins improving to 40.9% due to lower raw material costs and better price realization. EBITDA came in at ₹503 crore, up 38.9% YoY and 29.8% QoQ, with margins expanding to 13.3% as a result of operating leverage, favorable mix, and cost efficiency. Net profit surged 54.1% YoY to ₹178.5 crore, outperforming estimates on the back of strong operating performance and controlled finance costs. The management noted that the Camso acquisition, completed on September 1, 2025, is progressing well and is expected to be margin accretive over the medium term. On the raw material side, rubber prices remained stable at USD 1,700–1,750 per ton, while crude derivatives such as carbon black and synthetic rubber softened, offering short-term cost relief.

Valuation and Outlook

CEAT Limited delivered a strong Q2 FY26 performance, marked by healthy revenue growth and a sharp recovery in margins. Revenue was supported by continued traction in OEM and international markets, though the replacement segment saw a temporary slowdown in September due to pre-GST destocking. Momentum quickly revived post the tax cut, and management expects near double-digit growth in the coming quarters. Margins rebounded sharply, driven by softer raw material prices, better product mix, and strict pricing discipline. The company also benefited from operating leverage and higher realizations in premium passenger car and two-wheeler categories. Management remains confident of maintaining the current margin trend, with raw material costs expected to stay stable in Q3 FY26 as crude and natural rubber prices hover around current levels. While a weaker rupee could add minor pressure, CEAT expects to offset it through better realizations and efficiency gains. Having re-entered its long-term gross margin band of 40–42%, the company anticipates further improvement driven by premiumization rather than cost benefits. The recently completed Camso acquisition is expected to be margin-accretive as integration deepens over the next few quarters. Going forward, growth is likely to be supported by the GST cut’s positive impact on rural and semi-urban demand, increasing contributions from premium products like SecuraDrive, CIRCL, and RockRad, and operational synergies from Camso. Continued strength in international markets, particularly in Europe and Latin America, should further improve the mix and profitability. Overall, CEAT’s near-term outlook remains steady, backed by resilient margins, strong demand trends, and growth momentum from premium and off-highway segments.

Key concall Highlights

CEAT Limited reported a total volume growth of 11% in Q2 FY26, driven by strong performance in the OEM and international segments, while the replacement market saw mid-single-digit growth and a temporary slowdown in September due to pre-GST destocking. Management expects the replacement segment to bounce back with near double-digit growth in the coming quarters. The OEM business recorded robust mid-20s growth across all categories, led by festive demand and higher fitments in larger rim-size vehicles. International operations grew in high-teens, with Europe emerging as the most profitable and fastest-growing market for non-specialty products. Segment-wise, demand is expected to stay steady in MHCV (5–6%), Two-Wheelers (7–8%), and Passenger Cars (0–3%) with upside from GST benefits, while OEM and export demand remains strong. Margins improved due to a softer raw material basket, which was 5% lower sequentially, and better realizations from premium and export segments. Looking ahead, CEAT aims to sustain its margin profile supported by steady double-digit growth and stable input costs, even as rupee depreciation may offset some benefits. The recently completed Camso acquisition, effective September 1, 2025, is progressing smoothly and is expected to be margin-accretive once integration and direct customer linkages are completed over the next few quarters. On the balance sheet, CEAT maintained a strong financial position with total debt at ₹2,944 crore and healthy leverage ratios of 0.64x debt-to-equity and 1.8x debt-to-EBITDA. The company also introduced two innovative products this quarter — SecuraDrive CIRCL, a tire made from 90% sustainable bio-based material, and RockRad, a premium mining tire in the truck-bus radial segment — reinforcing its focus on sustainability and premiumization.