Fundamental Analysis of MRF: We all have memories of Sachin Tendulkar scoring centuries with an MRF bat. We grew older and learnt it is not a sport but a tyre company.

Recently, its stock was bustling all over the news as it crossed Rs 1,00,000 per share price (yes, it is the most expensive listed Indian stock). All this pokes investor curiosity in us.

How good MRF is as an investment? In this article, we’ll attempt to know that by performing a fundamental analysis of MRF.

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Fundamental Analysis of MRF

fundamental analysis of MRF - MRF Logo

We’ll start by briefing ourselves with the history, business, scale of operations and various divisions of the company. Next, we’ll learn about the industry landscape and move forward at pace to analyse the financials of the stock.

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In the end, we’ll read about any recent developments and future plans of the company. A summary concludes the article at the end. 

Company Overview

s Ltd. was established as a toy balloon manufacturer by K.M. Mammen Mappillai in 1946. The company ventured into other product lines such as contraceptives, gloves, and cast toys over the next few years before finally starting tread rubber production in 1952.

Fast forward to today, MRF is the second largest manufacturer of tyres in India with a market capitalization of Rs 43,500 crore. It produces and distributes a wide range of tubes and tyres for 2-wheelers, passenger cars, light, medium & heavy commercial vehicles, 3-wheelers, etc.

Apart from its main business, the company is also engaged in the business of providing associated services, manufacturing paints & coatings, producing & marketing toys for children, and sale of sports goods. 

MRF employs more than 19,000 people across its 10 manufacturing facilities and 192 offices within India and 3 offices overseas. It has a pan-Indian presence with its products being sold in all the states and Union Territories of India. Further, its products are sold to 60+ nations worldwide. 

We got a good understanding of the business for our fundamental analysis of MRF. Let us take a deeper look at the various business segments of the tyre manufacturer.

Business Segments of MRF 

MRF earns a majority of its income from selling automobile tyres within India. The two sub-headings below tell us more about its divisions.

Product-wise Segments

Automobile tyres and automobile tubes are the largest revenue segments for the tyres company accounting for 90.5% and 5.6% of the total FY23 revenue respectively. Its paints and coatings business is a small segment with only a 1.8% revenue contribution. The other businesses together contributed Rs 401.45 crore or 2.1% to its topline.

Geographical Segments

Domestic sales contribute a majority of 88.8 % of the total revenue of the automotive giant with the overseas sales share at 11.2%.

We got a good understanding of the business and the various segments. Let us now move ahead to read about the industry for our fundamental analysis of MRF.

Industry Overview

Tyre is an auto component making them come under the auto ancillary sector. The sector derives its demand from the automobile industry, thus closely tracking its growth.

The sector is further divided into two sub-segments: OEMs (original equipment manufacturers) fitments or new vehicle sales and aftermarket or replacement sales.

FY23 turned out to be a blockbuster year for the automotive sector with various sub-segments recording double-digit growth and the highest number of full financial year sales.

The production of Medium and Heavy Commercial vehicles (M&HCV) grew by 35%, passenger vehicles by 25%, tractors by 11%, and two-wheelers by 12%. 

Furthermore, some specific vehicle types including SUVs, electric vehicles, buses, haulage & tippers saw massive year-on-year growth.

However, input costs remained elevated for tyre producers even though for other auto components the situation improved. Overall, the outlook for auto OEMs and component manufacturers remains strong.

Going forward, a rise in disposable income, a stable macro-economic environment, rising capital expenditure and strong rural demand are expected to drive the automotive industry growth.

MRF – Financials

Revenue and Net Profit Growth

MRF reported a net profit of Rs 769 crore on sales of Rs 23,009 crore in FY23. Its topline grew at a CAGR of 9.8% over the past five years. During the same period, the net profit remained volatile, while peaking at Rs 1,423 crore in FY20.

The table below presents the operating revenue and net profit of MRF for the previous five financial years.

Fiscal YearOperating RevenueNet Profit

(figures in Rs Cr)

But why is it that the profits took a hit despite the growth in business? Let us attempt to answer that question by analyzing the profit margins during the study period for our fundamental analysis of MRF.

Profit Margins

The operating profit margin declined in the last two fiscals are rising raw material costs put a dent into the earnings of MRF. The net profit margin further declined because of a marginal decrease in other income.

The table below showcases how the operating profit margin and net profit margin of MRF have fared over the past few years.

Fiscal YearOperating RevenueNet Profit

(figures in %)

Reading so far, we can say that the company is facing macroeconomic headwinds. Let us now analyse its debt situation to see how it is protected against its downside.

Debt Analysis

The debt/equity ratio of MRF has largely stayed under the comfortable number of 0.20 during the study period. Overall, the profit and loss statement shows a good interest coverage of 8.3 times.

The table below highlights the overall stability in the debt-to-equity ratio and interest coverage ratio of MRF over the last five years.

Fiscal YearDebt/EquityInterest Coverage

Return Ratios: RoCE & RoE

The decline in earnings directly impacts the profitability of any company, bringing down its return ratios. The return on capital employed (RoCE) and return on equity (RoE) of the company stood at 8.23% and 5.2% in FY23, respectively. The highest RoE the tyres stock achieved was 11.6% in FY20.

The figures below represent the two return ratios: return on capital employed and return on equity of MRF stock over the previous five financial years.

Fiscal YearRoCERoE

(figures in %)

Future Plans Of MRF

So far we looked at previous years’ data for our fundamental analysis of MRF. In this section, we will try to get some sense of what lies ahead for the company and its investors.

  1. On a consolidated basis, the company spent a significant amount of Rs 3,291 crore and Rs 1,707 crore in FY23 and FY22 towards capital expenditure (CAPEX).
  2. MRF continued its focus on launching new and differentiated products for its customers targeting models of various OEMs separately such as  Royal Enfield Classic 350,  SUVs of Audi, BMW, Mercedes-Benz, Volvo, & Jeep, Force Traveller, and Toyota Innova.
  3. Its coatings and paints division MRF Corp also launched newer products while recording a 32% y-o-y value growth. The management is optimistic about the fast-growing segment. Its entry coincides with Aditya Birla Group’s Grasim Industry foray in the paints sector.

Fundamental Analysis of MRF – Key Metrics

We are almost at the end of our fundamental analysis of MRF. Let us take a quick look at the key metrics of India’s most expensive stock.

CMP ₹1,08,947Market Cap (Cr.)₹45,347
EPS₹1,813Stock P/E36.75
Promoter Holding28%Book Value₹34,680
Debt to Equity0.17Price to Book Value2.93
Net Profit Margin3%Operating Margin6%


As we conclude our fundamental analysis of MRF, we can say that MRF is in a mature industry. Its other businesses such as paints, services, etc. are still at a very early stage to have a significant bearing on the overall earnings of the company. 

Investors of MRF should closely follow earnings growth and keep an eye on any cues which can hint at margin improvement. Are tyre stocks a good ancillary play on the auto sector? What is your opinion of MRF? How about we continue this conversation in the comments below?

Written By Vikalp Mishra

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