Stock Market

Holding this stock can result in big loss, why brokerage house became ‘neutral’ on the country’s most expensive stock MRF

MRF has become cheaper by 21 percent from its record high. Its price in rupees has come down by more than Rs 21,300 from the record high. After the results, pressure is being seen on the stock.

MRF Stock Price: Madras Rubber Factory (MRF), India’s most expensive stock in terms of price, has become cheaper by 21 percent from its record high. Its price in rupees has come down by more than Rs 21,300 from the record high. After the September quarter results, the pressure on the stock is being seen more. In fact, the financial performance of MRF in the second quarter of FY 2022 has been weaker than expected. The profit for the September quarter has come down by about 54 percent. After the quarterly results, brokerage house Motilal Oswal has given a neutral rating on the stock of MRF and has reduced the target to Rs 73700.

There is a possibility of big loss in the stock

Brokerage house Motilal Oswal has given neutral rating on the stock of MRF. The target for the share has been made Rs 73700. The current price of the share is currently running around Rs 77800, in this sense there is a possibility of a fall of more than Rs 4000 in the stock. The brokerage house says that the performance of the company has been weaker than expected. Higher RM and other expenses have impacted the margins of the company. RM cast inflation has affected the results. The brokerage house has reduced the company’s EPS estimate for FY22E/FY23E by 29%/14%.

weak revenue growth

The brokerage house says that the revenue growth of MRF has been weak as compared to Pierce. The year-on-year growth in Revenue, EBITDA and PAT for 2QFY22 has been 15%, -40% and -55% per cent. While the revenue growth in the first half of the financial year stood at 35% y-o-y, EBITDA and PAT declined by 16% and 18% y-o-y. Talking about Pierce, the revenue growth of CEAT has been 24% on a yearly basis. Gross margin has come down to 35.5%, while it was expected to remain at 38.5%. EBIDTA margin declined by 980bps year-on-year to 10.6%.

Valuation

According to the brokerage house, MRF’s competitive positioning in the sector has weakened over the years. This has also had an impact on capex. This has affected the return ratio. However, the pricing environment for the industry is stable and all the companies are increasing the prices. Talking about the MRF, Karkwari seems to be coming from the end of FY22-end. In terms of current valuation, the brokerage has given a neutral rating on the stock.

Multibagger for investors

MRF stock has proved to be a multibagger for such investors. Looking at the past performance of the stock, it has proved to be a millionaire stock for investors since its listing. MRF was started in 1946. Whereas the company’s stock was listed in the stock market in April 1993. The share price that year was Rs 10. Today i.e. in the business of November 12, 2021, the stock reached a price of Rs 77800. Talking about this year, the stock has become expensive by Rs 98600. The company started manufacturing MRF tires in 1962. In 1973, the company introduced the country’s first radial tire. Today the market cap of MRF is Rs 34650 crore.

(Disclaimer: The investment advice here is given by the brokerage house. This is not the personal view of dgmartpro Business. Markets are risky, so take expert opinion before investing.)

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