CEAT Q2 FY27 Earnings Call: Record Revenue Up 26% YoY, Raw Material Inflation Weighs on Margins (CEATLTD)

CEAT Ltd held its Q2 FY27 earnings call on October 14, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Revenue, But Margins Compressed by Raw Material Inflation

• Consolidated revenue of Rs.4,762 Cr — highest ever, up 26.2% YoY, driven 40% by volume and 60% by price/mix; standalone revenue grew ~23% YoY on ~10% volume growth.
• Consolidated EBITDA margin of 9.5% (Rs.452 Cr) — up 94 bps QoQ but down 403 bps YoY; standalone EBITDA margin 10.14% (Rs.461 Cr), up 101 bps QoQ, down 356 bps YoY.
• Consolidated PAT of ~Rs.112 Cr — vs Rs.186 Cr in Q2 FY 2025-2026 and Rs.4 Cr in Q1 FY 2026-2027.
• Gross margin at 33.6% standalone / 34.6% consolidated — a ~6-7% shortfall vs normal 40-41% levels, as raw material costs rose 8-9% QoQ (cumulative 27% vs March 2026 exit).
• Domestic natural rubber at a 20-year high of ~Rs.285/kg — international crude hovered around $105/barrel at end-Q2 FY 2026-2027; management cited the West Asia conflict as a key driver of elevated crude/commodity prices.
• Consolidated debt of Rs.3,846 Cr — trailing 12m Debt/EBITDA at 1.93x, Debt/Equity at 0.77.

Price Hikes Lag Commodity Costs; More Increases Planned in Q3

• Cumulative price increases of ~13% in H1 FY 2026-2027 — 12-13% in replacement and 14-15% in OEM (1 Apr to 30 Sep 2026), including OEM increases of ~12-13% in July 2026; Q2 QoQ ASP impact was ~8% (revenue minus volume, incl. mix).
• Peer set has taken similar hikes — management confirmed competitors' replacement hikes match CEAT's ~12-13% in FY 2026-2027 with only 1-2 week lags and ±0.25-0.5% quantum differences; CEAT will go for further increases.
• Further 3-3.5% sequential raw material inflation guided for Q3 FY 2026-2027 — management plans price hikes "in low doses" throughout Q3 FY 2026-2027, with no comment on Q4 FY 2026-2027; international markets will see a country/category-specific approach.
• OEM pass-through carries a ~3-month lag — Q1 FY 2026-2027 price recovery flowed into Q2 with a lag; a similar ~3-month lag implies Q2's recovery should support Q3 FY 2026-2027.
• H1 FY 2026-2027 gross margin of ~33.5-33.6% vs a 41-42% target — a ~7-8% gap persists and further ~3% raw material cost increase is expected in Q3 FY 2026-2027.
• Rubber procurement mix unchanged — ~two-thirds imported, one-third domestic, despite international-local price parity.

Broad-Based Volume Growth; Q3 Moderation Flagged

• OEM and international business grew in high twenties — replacement grew mid-teens YoY in Q2 FY 2026-2027; on a segment basis, replacement grew lower single digit and export/OEM lower double digit, attributed to a production bottleneck and seasonal adjustment, not a demand slowdown.
• Premium passenger tire volumes (17"+) grew mid-30s% YTD — AI-led lead generation drove 1.2x premium tire sales and 36% growth in four-wheeler tire sales YoY.
• OHT delivered its strongest quarter — ~30%+ YoY growth in Q2 FY 2026-2027.
• OEM revenue shares — 25% in four-wheeler OEM, over 30% in two-wheeler OEM, ~25% in EV/premium tires in Q2 FY 2026-2027.
• H2 FY 2026-2027 replacement demand guided at mid-single digit for TV/CV tires — low single digit for passenger, double digit for two-wheeler, low growth for farm vs H2 FY 2025-2026; dealer inventory levels not considered high despite price hikes.
• Management cautioned demand may moderate in Q3 FY 2026-2027 — due to high base effects, El Niño, and repo rate hikes, with farm tire demand tapering post-monsoon deficit; blended replacement volumes still guided to grow mid-single digit in H2 FY 2026-2027.

85% Customer Transition Complete; EBITDA Neutrality Targeted in H2

• Camso customer transition 85% complete — remaining customers expected to be acquired by end of Q3 FY 2026-2027, establishing the ~$10 million/month billing run rate as the base for future growth.
• Volume ramp of ~20-25% guided between H1 and H2 FY 2026-2027 — from a previous run-rate of ~$10m/month, with further growth in FY 2027-2028 and FY 2028-2029; overall annual capacity is $150-200 million (period unspecified for full utilization).
• EBITDA neutrality/positivity guided for H2 FY 2026-2027 — margins expected to improve further in FY 2027-2028; EPS accretive status targeted by FY 2028-2029.
• Full CEAT value-chain control by Q2 FY 2027-2028 — making FY 2027-2028 the first full platform year; gross margins guided at 50-55%; upstream equipment setup in Sri Lanka may spill over to Q1 FY 2027-2028 vs the original end-FY 2026-2027 target.
• Sri Lanka plant capacity utilization currently below 50% — off-highway tires (incl. Sri Lanka exports) face a 10% US tariff rate, vs 25%+4% on on-road tires.
• Deferred Camso acquisition payment of $44 million due by August 31, 2028 — confirmed by CFO Kumar Subbiah.

Front-Loaded Capex; Leverage Guidance Tightened

• FY 2026-2027 capex guided at ~Rs.1,400 Cr standalone plus Rs.100-150 Cr for Camso upstream equipment — after ~Rs.800 Cr spent in H1 FY 2026-2027 (Rs.493 Cr in Q2), front-loaded for two-wheeler expansion in Nagpur and truck & bus radial expansion in Chennai; Q2 also included a ~Rs.140 Cr dividend payout.
• FY 2026-2027 debt/EBITDA guidance set at ~2-2.1x — lowered from the earlier 3x threshold; debt rose ~Rs.600 Cr in H1 FY 2026-2027.
• Standalone working capital rose ~Rs.70 Cr QoQ in Q2 FY 2026-2027 — driven by higher commodity prices inflating inventory, higher raw material inventory for supply security, and a rising international share extending receivables days.
• Working capital normalization to 0-Rs.100 Cr targeted in the next 1-2 quarters (Q3-Q4 FY 2026-2027) — on a consolidated basis, a structural increase is expected due to the Camso Michelin transition (Sri Lanka production, global sales), with the impact still under assessment.
• Finance costs to move in line with debt levels — CFO Kumar Subbiah attributed the QoQ drop to a one-off foreign fluctuation cost in Q1 FY 2026-2027, with 5-8% movement in debt levels possible from Q2 FY 2026-2027 into subsequent quarters; Q2 consolidated other income excludes ~Rs.20 Cr of CEAT Kelani (Sri Lanka JV) dividend eliminated in consolidation.

International Ambitions and Near-Term Watch Items

• International business at ~20% standalone / 24% consolidated revenue in Q2 FY 2026-2027 — management targets 33% of total CEAT revenue within 5 years; positioned as a value brand priced 15-25% below top European brands, and management stated international business remains margin accretive over the domestic market.
• Price transmission in international markets has been slow — due to competitive dynamics.
• US tariffs remain at 25%+4% on on-road tires — a continuing headwind for exports.
• Management cited the RBI's intervention package as limiting the rupee's negative impact — third-party context for currency dynamics.
• Next earnings call scheduled for January 2027 — CEO Arnab Banerjee closed the call acknowledging the conclusion of H1 FY27 and extended festive season wishes for Q3 FY27.