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Published: June 14, 2023
Updated: June 14, 2023

MRF Stock Price Surpasses Rs 1 Lakh Mark, Defying Analyst Predictions

MRF, India's leading tyre manufacturer, achieved a significant milestone on June 13 as its stock price crossed the long-awaited Rs 1 lakh mark. Despite concerns from analysts about its high valuations, the company's stock has witnessed remarkable growth, rallying over 45 percent in the past year and gaining 81 percent from its low point in March 2020. This article explores the factors contributing to MRF's success and the contrasting opinions among analysts.

Strong Performance and Q4 Boost:

Following the announcement of its Q4 results on May 3, MRF experienced a notable spike in its stock price. The company reported a consolidated profit after tax (PAT) of Rs 313.53 crore for the quarter ended March 31, 2023, marking an impressive 86 percent year-on-year (YoY) increase. In comparison, the net profit in the corresponding quarter of the previous year was Rs 168.53 crore. Consolidated revenue from operations also grew by 10.12 percent YoY, reaching Rs 5,841.7 crore. Additionally, MRF's board declared a final dividend of Rs 169 (1,690 percent on the face value of Rs 10 per share).

Analysts' Perspectives:

Despite MRF's exceptional performance, analysts hold divergent views on the stock. Bloomberg reports only one "buy" call, two "hold" calls, and eight "sell" calls for MRF. The 12-month target price on the stock stands at Rs 84,047, indicating a potential 16 percent decline from its current level. Most analysts express caution due to the company's high valuations, as it holds the title of being the most expensive tyre stock with a trailing price-to- earnings ratio of 55x. Motilal Oswal Financial Services, for instance, highlights the premium valuation relative to peers and raises concerns about MRF's competitive position and capital efficiencies.

Market Sentiment and Past Analyst Predictions:

The prevailing market sentiment towards MRF's stock was sceptical a year ago as well. At that time, there were four "buy" calls, three "hold" calls, and five "sell" calls, with a 12-month target price of approximately Rs 70,800. However, the stock has defied expectations and surpassed the Rs 1 lakh mark, confounding analysts who had predicted otherwise.

MRF's stock price reaching the Rs 1 lakh milestone reflects its exceptional performance over the past year and its ability to overcome analysts' cautious predictions. The company's strong Q4 results and consistent growth have propelled its stock price upwards, despite concerns regarding high valuations. As MRF continues to navigate the market, investors and analysts will closely monitor its performance to gauge its future trajectory.