CEAT Q1 FY27 Results (NSE: CEATLTD)
Signal: Margin pressure
The read
Q1FY27 marks a sharp reversal of the margin expansion trend seen in Q2-Q4FY26 (three straight quarters of OPM expansion). EBITDA margin collapsed ~200bps YoY to 9.13% as raw material costs spiked 550bps as a share of revenue. The quiet saviour was a very low tax charge (effective rate ~5%) and a ₹7 Cr VRS write-back — without which consolidated PAT would have been near zero. The underlying operating profit (before exceptional items & tax) fell 75% to ₹39 Cr. The standalone entity fared better (₹98 Cr PAT) but still declined 27% YoY. Subsidiary losses remain a drag.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹4,318 Cr | 22.4% | 2.3% |
| Net profit | ₹4 Cr | 12.7% | |
| EPS | ₹1.07 | ||
| EBIT margin | 9.13% |
P&L walk
Revenue grew 22.4% YoY, but EBITDA margin contracted ~200bps as raw material costs surged — cost of materials consumed rose to 69.0% of revenue vs 63.5% a year ago (a ~550bps spike). Gross margin tailwind from prior quarters reversed sharply. The operating profit before exceptional items was ₹39 Cr vs ₹159 Cr last year, a 75% drop. PAT of ₹4 Cr was protected by a ₹7 Cr exceptional gain (VRS write-back vs a ₹3 Cr charge last year) and a lower tax rate (effective ~5% vs ~29% in Q1FY26). Standalone largely mirrors the consolidated story with PAT of ₹98 Cr on standalone revenues ₹4,163 Cr.
Segments
Single segment — no sub-segment data disclosed. The material standalone-vs-consolidated gap (standalone PAT ₹98 Cr vs consolidated ₹4 Cr) arises from losses in foreign subsidiaries, particularly four unaudited subsidiaries with ₹79 Cr net loss.
Key positives
- Revenue growth remained strong at +22.4% YoY (consolidated) and +18.2% YoY (standalone), continuing the acceleration trend (Q4FY26 +23.3%, Q3FY26 +26.0%).
- Inventory turnover improved to 12.24x (annualised) vs 10.28x last year, indicating better inventory management.
- Debtor turnover improved to 9.26x vs 8.35x last year, suggesting tighter credit control.
- Board approved major capacity expansion (53k tyres/day, ₹1,205 Cr) — signals confidence in sustained demand.
Key concerns
- EBITDA margin contracted 198bps YoY to 9.13% — sharp reversal from the expanding trend of prior three quarters — due to raw material cost surge (cost of materials consumed rose 550bps as % of revenue).
- Consolidated PAT of ₹4 Cr is artificially supported by a very low tax rate (~5%) and a ₹7 Cr exceptional gain; underlying operating profit before exceptional items tumbled 75% YoY to ₹39 Cr.
- Subsidiary losses remain a significant drag — four unaudited subsidiaries reported a combined net loss of ₹79 Cr.
- Net debt/equity rose from 0.41 to 0.60 YoY, and finance costs surged 78% YoY, driven by increased borrowings for capex and working capital.
- Interest service coverage ratio fell from 4.43x to 3.76x YoY, reflecting lower EBITDA cover.
Research and educational content only. Not investment advice.