Why Did CEAT Outperform While NELCO’s Margins Declined in Q2 FY26?
In Q2 FY26, the earnings season brought a tale of two companies — NELCO, Tata Group’s satellite communication arm, witnessed margin compression, while tyre major CEAT accelerated on operational gains and strong market traction. The contrasting performances underline sector-specific headwinds and resilience in India’s mid-cap landscape.
NELCO reported a significant decline in profitability with net profit at ₹1.6 crore compared to ₹4.1 crore YoY, reflecting a 61% drop. Revenue slipped 10% to ₹74.3 crore, while EBITDA contracted 31% YoY to ₹7.5 crore. The EBITDA margin narrowed sharply to 10.05% from 13.13%, driven by weaker demand in enterprise connectivity and delayed project deliveries.
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CEAT, in sharp contrast, delivered a strong set of results. The company posted a net profit of ₹190 crore, up from ₹120 crore YoY, supported by lower raw material costs and higher replacement demand. Revenue rose 14% YoY to ₹3,770 crore, while EBITDA jumped 40% to ₹503 crore. The EBITDA margin improved to 13.34% from 10.96%, highlighting improved operating leverage and stable pricing in domestic and export markets.
Analysts note that CEAT’s consistent focus on premium product mix, cost optimization, and increased OEM share continues to drive profitability. Meanwhile, NELCO’s management remains focused on reviving demand through new enterprise contracts, satellite services expansion, and government-backed communication projects under Digital India initiatives.
Sectorally, telecom technology firms like NELCO are facing pressure from slower capex rollouts, whereas auto ancillary companies like CEAT benefit from rising vehicle demand and softening commodity costs. Both firms, however, highlight the broader cyclical divergence in industrial performance across Q2 FY26.
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Going forward, CEAT remains optimistic on volume growth and margin stability supported by sustained demand from passenger and two-wheeler segments. NELCO, on the other hand, may face near-term pressure as it repositions towards B2B communication contracts and government-led connectivity missions, but long-term growth potential remains intact with India’s satellite communication policy gaining traction.
Investor takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that CEAT’s operational efficiency and margin recovery demonstrate the strength of the auto component cycle, while NELCO’s weakness highlights challenges in niche tech and communication services. Investors should monitor raw material price trends and capex outlooks before taking positions in either counter.
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Related queries
- What factors led to CEAT’s margin improvement in Q2 FY26?
- Why did NELCO report weaker results this quarter?
- Which sectors are showing resilience amid Q2 FY26 earnings volatility?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
