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CEAT Ltd

| Quarterly Financial Results Q3 FY 2025–26

BULLISH SENTIMENT

Report Source

⬤19th Jan 26

Summary : CEAT Limited reported strong Q3 FY25-26 consolidated revenue growth of 26% Y-o-Y, driven by robust sales and improved margins, while planning significant capacity expansion and addressing new labor code impacts.

Quarterly Report Analysis & Insights

Financial Disclosures

  1. Exceptional items of 5,796 Lakhs (consolidated) due to new Labour Codes.
  2. Cost of materials consumed (consolidated Q3): 2,40,398 Lakhs.
  3. Employee benefits expenses (consolidated Q3): 28,224 Lakhs.
  4. Finance costs (consolidated Q3): 10,496 Lakhs.
  5. Depreciation and amortisation expenses (consolidated Q3): 18,814 Lakhs.
  6. Bad debts to account receivable ratio is 0.00% (standalone) and 0.07% (consolidated) for year ended March.
  7. Consolidated Q3 FY25-26 revenue: Rs. 4,157 crore, up 26% Y-o-Y.
  8. Standalone Q3 FY25-26 revenue: Rs. 3,957 crore, up 20% Y-o-Y.
  9. Net movement of cash flow hedges reported under other comprehensive income.
  10. Consolidated Net worth (Dec 31, 2025): 4,70,976 Lakhs.
  11. Consolidated Debt/equity ratio (Dec 31, 2025): 0.62.
  12. Consolidated Current ratio (Dec 31, 2025): 0.66.
  13. Consolidated Total debts to total assets (Dec 31, 2025): 0.22.
  14. Acquisition of Camso brand's Off-Highway business via subsidiary.
  15. Investments in various wholly-owned subsidiaries and joint ventures.
  16. CEAT Employees Welfare Trust established to administer ESOP scheme.
  17. Both standalone and consolidated financial results are presented.
  18. Consolidated results include 12 subsidiaries and 3 joint ventures.
  19. Standalone Q3 FY25-26 Net Profit: Rs. 192 crore.
  20. Consolidated Q3 FY25-26 Net Profit: Rs. 155 crore.

Corporate Overview

  1. Strong presence in global markets.
  2. Footprint in over 135 countries.
  3. Recently incorporated CEAT International UK Limited.
  4. Impact of new labour codes, requiring a provision of ₹58 crores.
  5. Reassessing and implementing policy changes for employee benefits.
  6. Stable commodity prices for sustaining gross margins.
  7. Leading Indian tyre manufacturer with global presence.
  8. Produces over 48 million high-performance tyres annually.
  9. Caters to 2-3 Wheelers, Passenger, Utility, Commercial, Off-Highway Vehicles.
  10. Positive outlook, expecting sustained momentum and strong year-end.
  11. Highlights strong revenue growth across all segments.
  12. Notes improved operating and gross margins.
  13. Acknowledges impact of new labour codes with provision.
  14. Vehicle owners across various segments (2-3 wheelers, passenger, commercial).
  15. 2-3 Wheelers
  16. Passenger and Utility Vehicles
  17. Commercial Vehicles
  18. Off-Highway Vehicles
  19. Existing capacity: About 95 Lakh Tyres per annum (including additions under implementation).
  20. Existing capacity utilization: ~80% of Installed Capacity (excluding additional capacity under implementation).
  21. Proposed capital expenditure at Chennai Plant.
  22. Adding about 35 Lacs Tyres per annum capacity.
  23. Investment of Rs. 1,314 Crores, funded by internal accruals and debt.
  24. Expected completion by end of First half of FY2028.
  25. Intended to service anticipated future demand in PCUV Category.

Risk Factors

  1. Impact of new labor codes on costs.
  2. Commodity price volatility affecting gross margins.
  3. Provisional acquisition accounting, final fair values pending.
  4. Negative net working capital position.

Key Drivers

  1. Chennai plant capacity expansion by FY2028.
  2. Strong revenue growth across all segments.
  3. Improved domestic market sentiment from GST.
  4. Expanding opportunities in international markets.

Auditor’s Report

  1. Unmodified conclusion on the unaudited standalone and consolidated financial results.
  2. Conclusion not modified regarding immaterial financial results of CEAT Employees Welfare Trust.
  3. Conclusion not modified regarding interim financial results of certain subsidiaries and joint ventures reviewed by other auditors.

Board Commentary

  1. Impact of new Labour Codes on employee benefits and costs.
  2. Government of India notified four new Labour Codes effective November 21, 2025.
  3. Recognized 5,781 Lakhs as exceptional item for employee past services.
  4. Proposed capital expenditure of Rs. 1,314 Crores for Chennai plant expansion.
  5. Acquisition of Camso brand's Off-Highway business for $225 Mn.
  6. Investment in CEAT OHT Lanka (Private) Limited (subsidiary).
  7. Additional investments in TYRESNMORE, PT CEAT Tyres Indonesia, CEAT Brazil Holding Ltda.

Corporate Governance

  1. Audit Committee reviewed results before Board approval.

Management Discussion & Analysis

Future Strategy

  1. Progressively add capacity to meet future demand.
  2. Sustain positive momentum to close the year strongly.

Industry Overview

  1. Good growth expected in short to medium term in PCUV Category.
  2. Opportunities opening up in international markets.

Macroeconomic Outlook

  1. Reduction in GST rates improved domestic market sentiments.

Operational Focus Areas

  1. Maintain capex to support growth, funded by internal accruals.
  2. Keep debt levels sustained at previous quarter.

Performance Drivers

  1. Strong revenue growth across all segments.
  2. Top-line growth drove operating leverage and margin improvement.
  3. Stable commodity prices helped sustain gross margins.

Risk Control Measures

  1. Reassessing and implementing policy changes for new Labour Codes.
  2. Monitoring finalisation of Central and State Rules for Labour Codes.

Critical Risks

  1. Financial impact from new Labour Codes implementation.
  2. Uncertainty regarding final fair values of acquired assets/liabilities.