MRF Shares Hit Record On Q4 Margin Boost, Positive Outlook

Shares of MRF Ltd. hit a record on Monday before falling off the peak by afternoon as analysts view margin expansion in the fourth quarter as a positive for the stock.

"The estimates for margins and volume growth of the tyre stocks were quite modest. MRF and Ceat have reported a really strong set of numbers," said Sanjeev Hota, senior vice president and head of research, Sharekhan Ltd.

"The gross margins for MRF expanded almost 490 bps, which was driven by soft iron prices. We see demand improvements going ahead," he said.

The drop in raw material prices has also triggered a positive outlook for tyre stocks. "The story of this sector entirely lies in the correction of raw material prices. Rubber prices have been correcting, and that is reflected in the improvement of their margins," Hota said.

The company's net profit rose 106% year-on-year to Rs 340.7 crore in the quarter ended March, according to its exchange filing. Ebitda margin expanded to 14.6%, compared to 10.2% in the fourth quarter of fiscal 2023.

MRF Q4 FY23 (Consolidated, YoY)

• Revenue is up 10% at Rs 5,841.7 crore.

• Ebitda is up 58% at Rs 853.6 crore.

• Ebitda margin at 14.6% versus 10.2%.

• Net profit is up 106% at Rs 340.7 crore.

Shares of the company fell 0.93% to Rs 97,699.95 apiece as of 2:25 p.m., compared to a 1.10% gain in the benchmark NSE Nifty 50. During early trade, the stock rose as much as 1.34% intraday to hit a record high of Rs 99,933.5 apiece.

Total traded volume so far in the day stood at 4.8 times its 30-day average. The relative strength index was at 83.35, implying that the stock may be overbought.

Out of the 12 analysts tracking the company, one maintains a 'buy' rating, one recommends a 'hold' and 10 suggest a 'sell' on the stock, according to Bloomberg data. The average 12-month consensus price target implies a potential downside of 16.9%.