Brokerage firm Motilal Oswal has reviewed the second-quarter results for companies like CEAT and Cyient DLM. While the reports suggest a positive long-term outlook, they also highlight significant challenges, including rising input costs and profit margin pressures that investors should track closely.
Motilal Oswal Financial Services has updated its outlook on several Indian companies following the release of their second-quarter results for fiscal 2027. The brokerage’s latest research highlights that while many companies are seeing healthy growth in revenue, profitability remains a concern due to rising costs and sector-specific challenges.
CEAT Navigates Cost Pressures
Tyre manufacturer CEAT reported a strong top-line performance with revenue growing by 26.2% year-on-year to reach approximately Rs 4,762 crore. Despite this growth in sales, the company’s bottom line faced difficulties. Adjusted profit for the quarter fell by 35% to Rs 121 crore, largely due to high raw material expenses, specifically the cost of rubber, which has pressured margins across the tyre industry.
However, there are signs of stabilization. The brokerage noted that CEAT’s EBITDA margins, a measure of core operating profitability, improved sequentially by 110 basis points to 9.6%. The key factor for investors to watch moving forward is whether the company can successfully pass on these input cost increases to customers through price hikes and how its integration of the CAMSO business impacts future earnings.
Cyient DLM Focuses on Scale
Cyient DLM, which operates in the electronics manufacturing sector, is seeing revenue growth of 27% year-on-year, reaching Rs 393 crore. This expansion is supported by demand from the aerospace and medical technology industries. While the revenue figure is positive, the company’s profitability has been affected by a 130 basis point contraction in EBITDA margins, which settled at 8.7%.
This margin decline suggests that the company is currently in an investment phase. Cyient DLM is shifting its business toward more complex, high-value manufacturing programs, often referred to as box-build manufacturing. While this transition may be causing short-term margin pressure, the company has built a record order book of Rs 2,810 crore. The main monitorable for investors is the company’s ability to execute on this order book while stabilizing its profit margins over the coming quarters.
Investor Perspective
For investors, these reports underscore the difference between sales growth and profit growth. In both cases, the companies are growing their business, but they are also managing significant operational hurdles. For CEAT, the main risk remains the volatility of raw material prices, which can quickly impact profitability. For Cyient DLM, the challenge lies in successfully executing its order book and managing the costs associated with upgrading its manufacturing capabilities. Investors should focus on management commentary regarding future pricing strategies and project execution timelines to assess how these companies might perform in the coming quarters.