Ceat shares dropped 9% after the tyre maker reported shrinking profit margins in the June quarter. While net sales grew 18% year-on-year to ₹4,163 crore, rising rubber and crude oil prices pushed margins down significantly. Investors are tracking how the company manages these rising input costs in the coming quarters.
Shares of tyre manufacturer Ceat declined 9% to ₹3,471.10 on the National Stock Exchange on Friday following the company's June quarter results for the 2026-27 financial year. While the company achieved a standalone net sales growth of 18% compared to the same period last year, reaching ₹4,163 crore, investor focus shifted toward a sharp contraction in profitability metrics.
Margin Pressure Due to Raw Material Costs
The company reported that its gross margins fell by approximately 625 basis points on a sequential basis to 33.4%. Similarly, the EBITDA margin—a key measure of operating profitability—dropped to 9.1%, representing a sequential decline of about 540 basis points. This pressure on profits was primarily driven by significant inflation in raw material costs. Specifically, the rising prices of natural rubber and Brent crude oil have increased production expenses, challenging the company's ability to maintain higher margins despite a 3% quarter-on-quarter increase in net sales.
Broader Sector Context and Market Movement
The decline in Ceat’s share price occurred amidst broader profit-taking in the midcap and smallcap segments. The Nifty Midcap 100 and Nifty Smallcap 100 indices both traded about 0.6% lower on Friday. This pullback follows a strong rally earlier in the current financial year, during which the Nifty Midcap 100 had gained 18% and the Nifty Smallcap 100 had risen 26% since April, both significantly outperforming the Nifty 50 benchmark.
Other companies in the industrial space also saw selling pressure. Polycab India shares fell 4%, and KEI Industries shares declined 3.5%. Polycab reported a 39% year-on-year revenue increase to ₹8,210 crore for the June quarter, but its margins also faced minor pressure, declining by 68 basis points to 13.8%. Additionally, Polycab noted a 13% drop in its export revenue, highlighting how sector participants are currently navigating challenges related to global demand and commodity price volatility.
Future Monitoring
For investors, the primary monitorable for Ceat will be its ability to pass on these higher raw material costs to customers through pricing adjustments. As commodity inflation remains a challenge for the automotive component sector, market participants will watch for management commentary on cost-control measures and demand trends in both the domestic replacement and original equipment manufacturer segments in the upcoming quarters.