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Anand Rathi Report
Above our Rs 9.8 billion estimate, MRF Ltd. Q1 Ebitda grew a healthy 16% YoY to Rs 11.4 billion, led chiefly by more revenue and less-than-expected employee cost. The replacement/export outlook is bright and MRF would gain share due to slower price hikes than peers.
Better sourcing of natural rubber from sister companies provides a cost cushion to MRF.
We expect near-term margins to be lower on higher prices of natural rubber and rates of ocean freight. We expect margins to rebound from Q4, led by pricing.
Considering costs, a 4-5% price hike would be needed in the next six months. We are cautious about nearterm challenges.
The stock is fairly valued, quoting at 24 times FY26E earning per share. Given limited potential, we retain our Hold recommendation, at a higher Rs 142,000 target price, 25 times FY26E price to earning (earlier Rs 124,000, 22 times FY26E).
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