CEAT share price slumps over 9% on Q1 results. Should you buy, sell or hold?

CEAT share price tumbled more than 9% on Friday, 17 July, after the tyre maker reported a 27% year-on-year decline in standalone net profit for the June quarter (Q1 FY27), despite posting healthy revenue growth.

The company reported a standalone net profit of ₹98 crore for the quarter, compared with ₹135 crore in the corresponding period last year, according to its exchange filing.

Revenue from operations rose 18% year-on-year to around ₹4,163 crore, up from ₹3,521 crore in the year-ago quarter, supported by strong demand across segments.

Alongside its quarterly results, CEAT announced that its Board of Directors has approved a ₹1,205-crore capital expenditure plan to expand manufacturing capacity in the two-wheeler tyre segment.

Under the expansion plan, the company aims to increase production capacity by 53,000 tyres per day in phases by FY31, raising total daily capacity from the current 80,000 tyres to 1.33 lakh tyres.

The company said the proposed investment will be financed through a combination of internal accruals and debt. It also noted that its existing facilities are operating at around 95% capacity utilisation, underscoring the need for expansion to cater to future demand growth.

Should you buy, sell or hold?

Motilal Oswal Financial Services has retained its 'Buy' rating on CEAT, although the brokerage said the tyre maker's Q1 FY27 earnings were significantly below its expectations due to sharply higher interest costs.

The brokerage noted that consolidated profit came in at just ₹4 crore, well below its estimate of ₹50.2 crore, even though operating margins were broadly in line with its projections.

According to Motilal Oswal, net sales rose 22.3% year-on-year to ₹4,320 crore, surpassing its estimates, supported by healthy volume growth across segments. The brokerage highlighted that the international business continued its recovery and emerged as the fastest-growing segment during the quarter.

It also pointed out that realisations improved sequentially and year-on-year, driven by price hikes in both domestic and overseas markets.

On the balance sheet, the brokerage noted that capital expenditure (capex) during the quarter stood at ₹293 crore, while debt increased to ₹3,240 crore from ₹3,000 crore in the previous quarter. As a result, the company's debt-to-equity ratio rose to 0.65x, while net working capital also increased sequentially to ₹138 crore.

Motilal Oswal further highlighted that CEAT's ₹1,200-crore capex programme, to be implemented by FY31, is primarily aimed at expanding its two-wheeler tyre production capacity by 53,000 tyres per day, bringing the total capacity to 80,000 tyres per day from the current 80,000 tyres per day. The brokerage believes the investment will support the company's long-term growth prospects.

Technical Views

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said CEAT has turned technically weak after a 7.7% decline, with the stock slipping below its key 20- and 50-day exponential moving averages (EMAs), signalling a deterioration in its near-term price structure.

According to Shah, momentum indicators have also turned bearish. The Relative Strength Index (RSI) is trending lower, indicating increasing downside momentum, while a rising Average Directional Index (ADX) alongside the price decline suggests the bearish trend is strengthening.

Shah believes the ₹3,670-3,700 zone, which coincides with the 20-day EMA, will act as the stock's immediate resistance. He added that as long as CEAT trades below this resistance band, the near-term outlook is likely to remain negative, with the stock expected to stay under selling pressure.

Hitesh Rathi, Technical Analyst -Equity & Derivatives, Angel One, said that CEAT has remained in a persistent downtrend since the last quarter of 2025, correcting nearly 25% from its highs. That said, the stock has found strong support in the 3300–3150 zone, where buyers have repeatedly stepped in to absorb selling pressure, preventing any meaningful breakdown below this crucial support band.

According to Rathi, the stock now appears to be in the process of forming a base following the recent corrective phase. However, a decisive breakout above the 3950–4000 resistance zone will be required to confirm a trend reversal and signal a resumption of the broader uptrend. Until then, as long as prices remain confined within the well-defined 3900–3100 trading range, any meaningful acceleration in directional momentum is likely to remain elusive.

“Despite the ongoing range-bound activity, the underlying technical structure suggests that buyers are gradually gaining control. On the higher timeframe daily 3% × 3 Point & Figure chart, the stock has triggered a *Triple Top Buy* alongside the formation of a *Bear Trap*, both of which are constructive developments that reinforce the improving technical outlook. Accordingly, any corrective decline towards key support levels may be utilised as an opportunity to gradually accumulate the stock from a medium-term perspective,” said Rathi.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.