MRF gains 4%, hits new high in weak market on strong Q1 results

Shares of MRF hit a new high of Rs 106,706.90, gaining 4 per cent on the BSE in Thursday's intra-day trade, in an otherwise weak market after the tyre manufacturer reported a strong set of results with consolidated profit after tax (PAT) jumping nearly five-fold to Rs 588.75 crore in the June quarter (Q1FY24). This was due to lower raw material cost.

It had posted PAT of Rs 123.60 crore in the year-ago quarter. On a sequential basis, PAT rose 73 per cent from Rs 340.67 crore in Q4FY23.

MRF's revenue from operations grew 13 per cent year-on-year (YoY) and 10 per cent quarter-on-quarter (QoQ) to Rs 6,440 crore. Raw material cost was down 8 per cent YoY and up 2.7 per cent QoQ to Rs 3,781 crore. The benefits of lower raw material cost resulted in better profitability during the quarter.

At 03:18 PM, the stock was trading 3.9 per cent higher at Rs 106,643, as compared to nearly 1 per cent decline in the S&P BSE Sensex.

MRF is engaged in the manufacture of rubber products such as tyres, tubes, flaps, tread rubber and dealing in rubber. The tyre industry in India has the potential to become a global leader in manufacturing, especially with the current search for alternatives to China due to geo-political tensions.

The industry exemplifies the Make in India initiative, having achieved self-reliance and emerging as a major exporter of tyres to over 170 countries, including the US and Europe, as evidenced by the rising demand for Indian-made tyres.

Pent up demand in passenger vehicles will cool in financial year 2024 but secular economic growth should provide steady growth to the auto industry. Higher capital expenditure by the auto industry points to high levels of capacity utilisation and is a pointer to higher levels of production in the future.

With new BS VI phase-2 transition effective April 1, 2023, vehicle costs will go up. However, the reduction in input costs will be a positive for the auto industry, MRF had said in FY23 annual report.