Shares of tyre maker MRF declined 6 per cent in Wednesday's trade after the company posted less-than-expected numbers in September quarter results, hurt by higher costs and inferior product mix. Analysts are largely ‘Neutral’ to 'Negative' on the stock, as they believe the stock is already pricing in any recovery in margin due to falling commodity prices.
The scrip fell 6.32 per cent to hit a low of Rs 88,915.05 on BSE.
Kotak Institutional Equities said MRF's revenue growth continues to lag peers. MRF has lost market share in two-wheeler and PCR (passenger car radial tyres) segments, as per channel checks, which is a cause for concern, the brokerage said.
"While RM correction will benefit the company from December quarter, we believe RM tailwinds benefit is being already priced in at current market price," it said while suggesting a 'sell' on the stock with a target of Rs 66,000.
Kotak said the stock is currently trading at 29 times FY2024E EPS, which is very expensive given the commoditised nature of the business as well as weakening return ratio profile of the company.
Motilal Oswal said that the current valuations at 63.6 times FY23 EPS and 25.7 times FY24 EPS fairly capture the changing competitive dynamics for MRF.
"We reiterate our Neutral rating, valuing it at 20 times December 2024E EPS to arrive at our target of Rs 86,575," it said.
The company had on Tuesday clocked a 53.99 per cent plunge in consolidated net profit at Rs 189.06 crore for September quarter compared with Rs 410.92 crore in the year-ago quarter.
Revenue from operations for the quarter rose to Rs 4,907.81 crore from Rs 4,244.43 crore YoY.
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