CEAT Limited: Q2 FY26 Sees Robust Growth Amidst Strategic Shifts

CEAT Limited, a prominent player in the Indian tyre industry, has reported a strong performance for the second quarter of Fiscal Year 2026. The company's consolidated revenue surged by an impressive 14.2% year-on-year, reaching Rs. 3,773 crore. This growth was complemented by a significant expansion in the consolidated EBITDA margin, which climbed to 13.5%, marking a 259 basis points increase quarter-on-quarter and 250 basis points year-on-year. The net profit for the period stood at Rs. 185.7 crore, reflecting a healthy financial trajectory.

The robust revenue growth was primarily driven by strong volume performance in both the Original Equipment Manufacturer (OEM) and international business segments, which recorded double-digit growth. While replacement demand experienced a slight moderation in September due to pre-GST announcement deferrals, it still contributed positively to the overall quarterly performance. The company saw particular strength in passenger car tyres, securing fitments in new models, and witnessed good traction in motorcycle tyres within the OEM segment. Internationally, CEAT's business expanded by mid-teens across key geographies including Europe, Africa, and LATAM, with passenger car tyres being a significant growth driver in Europe.

Financial Highlights: A Snapshot

The significant improvement in profitability, particularly the EBITDA margin expansion, was largely attributable to a softening of raw material prices. The raw material basket saw a reduction of approximately 5% compared to the previous quarter. This, combined with improved net sales realization across both replacement and international businesses, allowed CEAT's gross margin to return to its long-term target range of 40% to 42%. Despite a 3% depreciation of the Indian Rupee, which could impact future raw material costs, management expects raw material prices to remain stable in the upcoming quarter.

Strategic Acquisitions and Innovation Drive Growth

A key strategic move for CEAT this quarter was the completion of the CAMSO business acquisition from Michelin on September 1, 2025. This acquisition, valued at a total cash outflow of Rs. 1,232 crore, positions CEAT as a leading player in the premium Off-Highway (OHT) segment. Management expressed confidence in the integration process, reporting successful efforts and no surprises in the first month of operation in Sri Lanka. The company anticipates this business to be margin-accretive in the medium term, with full control over the value chain expected within five to six quarters as upstream equipment is established.

Innovation remains a core focus for CEAT. The company launched SecuraDrive CIRCL, India's first passenger car tyre made with up to 90% sustainable materials, highlighting its commitment to green mobility. Additionally, the premium mining tyre, RockRad, was introduced in the truck-bus radial segment, showing early promise. CEAT is also actively investing in digital transformation and Artificial Intelligence, implementing autonomous digital agents and an agentic chatbot to enhance customer experience and streamline operations across its value chain.

Outlook and Capital Allocation

Looking ahead, CEAT's management is optimistic about the Indian tyre market, projecting robust single-digit growth. This positive outlook is bolstered by the recent GST rate reduction on tyres, which is expected to stimulate demand, particularly in semi-urban and rural areas. The company also anticipates continued growth in the EV segment for both two-wheelers and passenger cars.

CEAT plans a total capital expenditure of approximately Rs. 1,000 crore for FY26. This includes investments in R&D, plant maintenance, and expansions in key segments like truck and bus radial tyres and passenger car downstream. Despite the increase in consolidated debt due to the CAMSO acquisition and CAPEX, the company maintains a comfortable debt-to-EBITDA ratio of 1.8x and a debt-equity ratio of 0.64x, assuring that leverage levels will not significantly exceed current levels. The company's focus remains on disciplined capital allocation to support future growth while maintaining a healthy balance sheet.

Segment Performance Overview

CEAT's Q2 FY26 performance underscores its strategic clarity and disciplined execution. With strong financial results, successful integration of a key acquisition, and a clear roadmap for innovation and market expansion, the company is well-positioned for sustained growth in the dynamic tyre industry.