MRF share turned Rs 1 lakh into Rs 13 lakh in 10 years, do you own it?

Investors in tyre stocks have reaped huge gains during the last ten years. Among them, MRF Ltd has delivered maximum returns to its shareholders since August 12, 2009. The tyre maker has delivered 1,237% returns during the last ten years. Rs 1,00,000 invested into MRF stock on August 12, 2009 would have grown to Rs 13.37 lakh today.

In comparison, MRF's competitors such as CEAT Ltd,  Apollo Tyres and JK Tyre have delivered 532.43%, 305% , 213% returns, respectively during the period under consideration.

The share price of MRF stood at Rs 4,258.45 exactly ten years ago.  Currently, it stands at Rs 56,953.75 on BSE. MRF share price has lost 24.91% during the last one year and fallen 15.11% since the beginning of this year.

In comparison, the benchmark Sensex rose 4.20% since the beginning of this year and lost 1.16% during the last one year.

The largecap stock closed at 54,750 level on Friday. The share hit a fresh 52-week high of 77,391 level on August 9, 2019. It hit a 52-week low of 51,850 on May 2, 2019. The stock has been gaining for the last four days and risen 6.83% during the period.

The meteoric rise in MRF share price can be attributed to strong financial results and absence of stock splits and bonus shares. In fact, the firm has had 42,41,143 shares outstanding during the period under consideration.

This led to the phenomenal rise in the stock backed by robust financial performance. For the quarter ended June this fiscal, MRF reported a 2.13 per cent year-on-year (YoY) growth in its consolidated net profit at Rs 273.27 crore for the first quarter ended June 30, 2019.

"The country's largest tyre manufacturer had posted a consolidated net profit of Rs 267.56 crore during the same quarter last year," MRF said.

Consolidated net sales grew by 15.14 per cent to Rs 4,471 crore in April-June quarter of the current fiscal as against Rs 3,883 crore in the year-ago period. Its total income during Q1FY20 stood at Rs 4,576.66 crore as against Rs 3,954.51 crore in the same quarter last year, MRF said.

During the last ten years, the firm has logged a consistent rise in its financial performance. Net profit for the fiscal ended March 2019 stood at Rs 1,130.61 crore compared to Rs 357.51 crore for the fiscal ended September 2010. The firm followed October to September year for earnings purpose till the end of September 2014 fiscal.

The firm reported Rs 16,484 crore in total revenue for the fiscal ended March 2019 compared to Rs 7,494.02 crore for the fiscal ended September 2010.

Basic earnings per share rose to Rs 2,666 for the fiscal ended March 2019 compared to Rs 1,907 for the fiscal ended September 2010. Six of nine brokerages rate the stock "buy" or 'outperform', and three "underperform", according to analysts' recommendations tracked by Reuters.

MRF is the largest manufacturer of tyres in India. However, the firm has not been insulated from the slowdown in auto sector.

In fact, on July 16 this year, MRF said the current year would be a tumultuous one for the automobile industry, especially in transition towards BS-VI fuel norms from BS-IV.

"The uncertainty is further compounded by lower consumer sentiments resulting in inventory build-up, and all original equipment manufacturers aligning production in line with demand," MRF Ltd chairman and managing director K M Mammen said in the company's annual report.

Edited by Aseem Thapliyal