 "Tyres")
Shares of MRF gained 2 per cent to Rs 95,711.65 in Thursday’s intra-day trade, and extended its previous day’s gain, after the company posted healthy set of numbers for the January-March quarter (Q4FY23).
In the past two trading days, the tyre maker rallied 8 per cent. It quoted close to its 52-week high level of Rs 95,954.35, which it had touched on November 7, 2022.
The board has declared a special dividend of Rs 169 per share. The total dividend for FY23 stood at Rs 175 per share.
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On a standalone basis, the company’s revenue grew 3.4 per cent quarter-on-quarter (QoQ) at Rs 5,725 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 53.7 per cent QoQ at Rs 834.1 crore, with margins at 14.7 per cent up 480 bps QoQ.
The company posted profit after tax (PAT) of Rs 411 crore including one time exceptional gain of Rs 80 crore, against PAT of Rs 170 crore in Q3FY23.
Analysts at Motilal Oswal Financial Services (MOFSL) said that MRF’s Q4FY23 performance surprised positively as lower raw material costs boosted Ebitda margin to 14.7 per cent (est. 11.9 per cent).
"The Ebitda margin recovery is expected to continue in FY24 on the back of softening raw material costs and operating leverage," the brokerage firm added.
MRF’s competitive positioning within the sector has weakened over the past few years, which is also being reflected in the dilution of pricing power in the PCR and TBR segments, said analysts. This, coupled with the impact of capex to be carried out, should result in limited expansion in return ratios.
However, analysts also MRF’s return ratios to see a relatively lower uptick v/s peers over the next two years as its RoE is expected to reach 10.5 per cent by FY25 (lower than Apollo Tyres/CEAT at 12.2 per cent/13.7 per cent).
"The current valuation at 22.3x FY25E EPS represents an almost 100 per cent premium to its peers, despite a weakening competitive position and similar capital efficiencies," analysts at MOFSL added.
