Ceat shares surged over 8% intra-day, reacting to a stronger-than-expected March quarter performance. Motilal Oswal reiterated a ‘Buy’ recommendation on the stock. The brokerage pointed to earnings beating estimates on the back of margin expansion, higher other income and steady demand across segments.
The firm maintained a positive stance, noting that growth momentum is expected to continue, supported by operating leverage and stable cost conditions.
Motilal Oswal on CEAT: Strong quarter lifts outlook
Motilal Oswal said Ceat delivered a solid operational performance in the March quarter, with net sales rising to Rs 4,200 crore from Rs 3,410 crore year on year in the fourth quarter of financial year 2026, marking a 23.3% increase driven by healthy volume growth and better pricing.
The brokerage noted that margins held firm despite cost pressures. Gross margin stood at 39.7% on a quarter-on-quarter basis, supported by a stable raw material basket. Earnings before interest, taxes, depreciation and amortisation margin expanded to 14% from 13.6% expected earlier, aided by operating leverage.
“Net sales grew 23.3% year on year, largely in line with our estimates, aided by healthy volume growth across all segments and slightly better realisations,” Motilal Oswal said in its report.
The firm added that operating performance came in ahead of expectations, with profitability supported by both scale and cost efficiency.
“EBITDA margins expanded led by operating leverage benefits, reflecting improved cost absorption and scale efficiencies,” the brokerage noted.
Motilal Oswal on CEAT: Earnings beat led by other income and cost control
The report pointed out that earnings beat estimates mainly due to higher other income and disciplined cost management. Earnings before interest, taxes, depreciation and amortisation rose to Rs 790 crore from Rs 516 crore year on year, translating into a 53% increase.
Other income came in at Rs 25.7 crore against the brokerage estimate of Rs 4.4 crore, which supported the bottom line. Adjusted profit after tax rose to Rs 250 crore from Rs 126 crore year on year, an increase of 98%.
“Other income was higher than expected, contributing to the earnings beat along with stable operating performance,” Motilal Oswal said.
The brokerage also flagged a one time expense during the quarter but noted that it did not materially dent profitability.
“The company incurred a one time extraordinary expense as compensation for employees opting for the voluntary retirement scheme,” the report stated.
Motilal Oswal on CEAT: Full-year performance shows steady expansion
For the full financial year 2026, Motilal Oswal highlighted consistent growth across key metrics. Revenue rose to Rs 15,600 crore from Rs 13,200 crore year on year, reflecting a 19% increase.
Margins also improved, with earnings before interest, taxes, depreciation and amortisation margin expanding to 13.1% from 11.2% in the previous year, indicating better operating efficiency.
Profit after tax climbed to Rs 750 crore from Rs 510 crore year on year, marking a 47% increase.
“Revenues grew 19% year on year while margins expanded, leading to strong profit growth for the full year,” Motilal Oswal said.
The brokerage added that cash flow trends remained healthy despite near term pressures from investments.
“Operating cash flow generation remained robust, although free cash flow was impacted by the Camso acquisition,” the report noted.
Motilal Oswal on CEAT: Balance sheet trends and capex
Motilal Oswal said CEAT continued to invest in capacity and growth initiatives during the quarter. Capital expenditure stood at Rs 400 crore in the March quarter, while net working capital increased sequentially.
Gross debt rose to Rs 3,000 crore from Rs 2,200 crore quarter on quarter, reflecting investment activity and working capital changes.
“Capex and working capital requirements led to an increase in debt levels during the quarter,” Motilal Oswal said.
Despite this, the brokerage maintained that balance sheet metrics remain manageable given improving profitability and operating cash flows.
Motilal Oswal on CEAT: Demand outlook remains firm
The brokerage said management commentary pointed to continued demand strength across segments, which could support growth going forward. Volume growth remained healthy in replacement as well as original equipment manufacturer segments.
Motilal Oswal noted that pricing discipline and stable raw material costs could help sustain margins in the near term.
“Management expects growth momentum to continue going forward, supported by demand across segments and stable cost conditions,” the report said.
The firm added that operating leverage would remain a key driver for profitability if volumes continue to rise.
Conclusion
CEAT’s latest quarterly performance has reinforced confidence in its operating strength, with Motilal Oswal maintaining its ‘Buy’ view after earnings came in ahead of expectations.
While debt levels have risen due to investments and working capital needs, the brokerage believes improving profitability and cash flows provide adequate support. With management indicating continued demand strength and stable cost conditions, the near-term outlook remains positive based on the brokerage’s assessment.
Disclaimer: The analysis and reiteration of this ‘Buy’ rating are based on specific brokerage reports and market performance data; however, this should not be construed as a direct offer or solicitation to trade. Investing in individual equities involves significant market risk, and the mentioned projections or historical earnings may not guarantee future results. We recommend consulting a SEBI-registered investment advisor to evaluate these findings against your personal financial goals and risk appetite before making any investment decisions.
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