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CEAT reported strong topline growth in 2QFY27, with consolidated revenue up 26% yoy, led by 23% yoy standalone growth (40% volume-led) and 38% qoq growth in CAMSO (C-S). Growth was broad-based across segments. Going ahead, the management targets DD revenue growth in 2H, alongside further price hikes. 2W growth is expected to lead at DD, driven largely by rural demand, followed by midsingle-digit CV and low-single-digit PV growth. Key demand monitorables include high-base catch-up, El-Niño, and the recent repo rate hike. RM costs rose 8-9% qoq in 2Q and are expected to increase a further 3-3.5% sequentially in 3Q. To mitigate this RM inflation, CEAT has implemented calibrated price hikes (12-13% in FY27TD for replacement and 14-15% in the OEM segment), with further increases planned in 3Q. The management expects pricing actions to support margin recovery, narrowing the GM gap from ~34% in 1H toward the normalized historical level of ~40-41%. CAMSO’s revenue grew 38% qoq, with 10ppt sequential GM improvement. ~85% of customers have transitioned, with the balance expected to be completed by Nov-26 (3QFY27). Its monthly revenue is expected at ~$10mn, with ~20% volume growth anticipated in 2H. Its EBITDA is expected to turn neutral-to-positive in 2HFY27, with further improvements in FY28. Factoring in RM cost pressures, we cut our FY28/FY29 EPS estimates by 8%/4%. We build revenue/EBITDA/PAT CAGR of 14%/15%/15% over FY26-29E. We maintain BUY with a TP of Rs4,500 (rolled forward to Sep-28E).

Growth momentum sustains; sequential margin improvement

Consolidated revenue grew 26% yoy, with 110bps qoq EBITDAM improvement to 9.6%, primarily led by 70bps GM expansion, though EBITDA/adjusted PAT declined 9%/33% yoy. Standalone revenue grew 23% yoy, with 100bps EBITDAM improvement qoq. Subsidiary (C-S) revenue grew 38% qoq, with 10ppt sequential GM expansion.

Earnings call KTAs

1) Volume growth of ~10% contributed to overall growth, with the balance driven by price hikes and improved product mix.

2) 2H growth is likely to be led by 2Ws (double digit), largely driven by rural demand. CVs are expected to grow at mid-single digits, while PVs are likely to deliver low-single-digit growth. High base catch-up, El- Niño, and the repo hike remain key monitorables for growth visibility.

3) RM costs grew 8-9% qoq in 2Q and are likely to rise a further 3-3.5% qoq in 3Q.

4) To mitigate cost inflation, CEAT has implemented calibrated price hikes (12-13% in FY27TD for replacement and 14-15% in OEM segment), with further increases planned in 3Q, including across export markets.

5) Margin improvement is likely to be led by price hikes, which will help narrow GM gap from ~34% in 1H to the normalized levels of ~40-41%.

6) In the international business, strong recovery was visible from demand revival in Africa and LATAM; sales to ME, though improving, remains impacted.

7) CEAT commands ~25% share in E-PV and +30% in E-2W, with strong growth in premium tyres.

8) CAMSO: ~85% of customers are transitioned, with the rest to be completed by Nov-26 (3QFY27). Monthly revenue is expected at ~$10mn, with ~20% volume growth expected in 2H. EBITDA is likely to turn neutral-to-positive in 2HFY27 with further improvements in FY28.

9) The overall CAMSO transition involves setting up local entities in key markets to serve customers locally. The installation of upstream equipment in the Sri Lankan plant is expected to be completed by 1QFY28. 10) The balance CAMSO payment of $44mn is scheduled for Aug-28. 11) FY27 capex guidance: Rs15.5bn (including ~Rs1.5bn at CAMSO’s upstream equipment).

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