Investors lost ₹ 9,000 per share after MRF’s share price plunged 9.48 percent on Wednesday to reach an intraday low of ₹ 85901.65. This happened after the company reported a substantial decline in its margins. Its shares were trading at ₹ 86,724.10 apiece, 8.60 per cent lower at 02:51 PM on Wednesday.
The Chennai-based tyre manufacturer’s revenue came in at ₹ 5826.3 crores, up 18.71 per cent as compared to ₹ 4907.8 crores during the same period last year.
However, its net profit for the quarter declined 24 per cent to ₹ 145.4 crores on a consolidated basis. Further, its EBITDA margin for the September quarter fell to a multi-quarter low. It stood at 8.2 per cent, down 240 basis points as compared to the same period last year.
Soaring input costs and supply chain issues during the quarter offset a rise in its revenue. MRF’s raw material costs increased by 2 to 3%, its overall expenses jumped 21%, and its finance costs jumped 29%.
MRF’s board has approved an interim dividend of ₹ 3 per share and the record date for which has been set as November 18. The shares will start trading ex-dividend one business day before the record date. The dividend declared will be paid on or after 2 nd December 2022, according to a regulatory filing.
Moreover, its board has also approved the enhancement in the issue of Non-Convertible Debentures through private placement from ₹ 100 crore earlier to ₹ 150 crore.
Analysts believe that the stock is already pricing in any recovery in margin due to falling commodity prices and are largely ‘Neutral’ to ‘Negative’ on the scrip.
Kotak Institutional securities has a sell rating on the stock with a target price of ₹ 66,000. This indicates a downside of 23.90%. The brokerage said that the stock is currently trading at 29 times FY2024E EPS, which is very expensive given the commoditized nature of the business as well as weakening return ratio profile of the company.
It added that MRF’s revenue growth continues to lag peers. Further, MRF has lost market share in two-wheeler and PCR (passenger car radial tyres) segments, which is a cause for concern.
Written by Simran Bafna
