Shares of CEAT Ltd. fell as much as 9.26% as the market opened on Friday after the tyre maker reported a sharp decline in its June quarter earnings, as higher input costs weighed on margins despite strong revenue growth.
The stock was trading at Rs 3,479.2 apiece on the National Stock Exchange around 9:46 am today, down from its previous close at Rs 3,829.6.
Investors will closely monitor whether easing commodity prices and the upcoming capacity addition help the company improve margins and sustain revenue growth over the coming quarters.
Profit Slides As Margins Shrink
CEAT reported a 96% year-on-year decline in consolidated net profit to Rs 4 crore for the first quarter of FY27, compared with Rs 112 crore a year ago.
Revenue from operations rose 22.4% year-on-year to Rs 4,318 crore from Rs 3,529 crore, reflecting healthy demand across its business segments. However, profitability remained under pressure as rising costs impacted operating performance.
Ebitda declined 5.7% to Rs 365 crore from Rs 387 crore in the year-ago period. Ebitda margin contracted 250 basis points to 8.5% from 11%, highlighting the impact of cost inflation on the company's margins.
The weaker-than-expected earnings and margin compression weighed on investor sentiment, sending CEAT shares nearly 8% lower in Friday's trade.
ALSO READ: CEAT Q1 Results: Tyremaker Stays Barely Profitable Even As Revenue Climbs 22%
Board Approves Rs 1,205 Crore Expansion
Despite the weak quarterly earnings, CEAT announced a major capacity expansion plan aimed at supporting long-term growth.
The company's board approved an investment of Rs 1,205 crore to expand manufacturing capacity at its Nagpur plant. The expansion will add 53,000 tyres per day of production capacity at the facility, which is currently at 80,000 tyres per day.
“The existing production capacity for two-wheeler tyres at the Company's Nagpur plant is nearing full utilisation. In line with proactive capacity planning initiatives, the Company would augment manufacturing capacity, in greenfield and/or brownfield as per internal assessment,” the company said in a regulatory filing.
Stock Price Performance
The stock has been under pressure for a year, losing over 8.3% during the period, when the broader market index Nifty 500 stayed almost muted with a decline of 0.75%.
In the past month, CEAT's shares witnessed a turnaround, but Friday's sharp decline has again made the stock fall.
The current total market cap of the company is around Rs 14,134 crore, while it is trading at a price-to-earnings multiple of 27.3 times.
ALSO READ: Q1 Results Live Updates: CEAT Net Profit Sinks 96%; JFS Profit Surges 2.5X.
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