Madras Rubber Factory (MRF), India’s largest tyre maker has been creating in the buzz in the stock market owing to high share prices. In April 2018, the company’s share hit a lifetime high of Rs.80,000. In August 2001, the price of the share was in the level of Rs.500. This essentially means, the investors who own MRF shares have received amazing increase of a whopping 15,800% since August 2001. In the past 17 years, the shares have multiplied 50 times from Rs.1,218 in January 2001. The price of the share as on 29 June 2018 is a little over Rs.75,300. Owing to strong annual revenues since past few years, the stock of the company has performed well as the company bagged some important landmarks. According to a couple of analysts, the MRF share price is expected to hit the six-figure mark of Rs.1,00,000. MRF forayed the stock market in September 1996 and has since then seen a remarkable increase in the stock prices. It has become the most expensive stock on the indices. In the past over 15 years, MRF has delivered superb returns annually. As on 29 June 2018, the market capitalisation of the company is Rs.31,700 crore. In FY 2018, the tyre behemoth recorded a 25% drop in its net profit for the fiscal ended March 31, 2018 to Rs 1,092.08 crore. MRF’s total income (net of excise duty) saw an increase of 11.22% to Rs 15,104.40 crore for fiscal 2018. Meanwhile, the company’s profit before tax (PBT) stood at Rs.1,601.91 crore for the year.
Currently, MRF’s earning per share (EPS) is higher than its competitors such as Apollo Tyres , JK Tyre and CEAT. The company’s share price is trading at twelve-months price-to-equity ratio (P/E) of 22.32 times, which is lower than the industry PE of 23.15 times. The share price has been quite stable and is projected to be stable as the company is expected to multiply its earnings over the next few years by over 50%. Hence, it is safe to say that MRF has a majorly optimistic future going forward. As a result, the company could witness a more robust cash flow that could eventually lead to an increase in the share value. At a market cap of little over Rs.2500 crore, MRF announced a capex in excess of Rs.6,000 crore.
As per experts, MRF is a very strong band and cannot be treated as a commodity. Another reason for an increase in the stock price is the comparatively small equity base. MRF has a total of nine manufacturing facilities across India and exports to over 65 countries. At present, the market leader in tyres, manufactures over 8-9 lakh tyres per month across these facilities.
By the year 2020-21, MRF Tyres plans to increase its revenue to around Rs 20,000-22,000 crore. The company is looking forward to invest around Rs.800-1,000 crore every year on products and brown field expansion. In addition, the investment will also be used towards automation, expansion of existing manufacturing facilities, research & development (R&D) and others.
Automobile sales in India have been expanding thanks to an increasing demand by a record two-wheelers and truck volumes. The company is expected to continue its strong performance and garner better revenue growth thanks to the stability in rubber prices. MRF has also expanded its portfolio beyond tyres and have made a mark in other business such as conveyor belts, toys, tubes, and paints, and others. Last year, MRF introduced PERFINZA, a new luxury and premium range of passenger car tyres which is aimed at serving high-end automobiles.
The stock has seen a major jump of nearly 48% between January 2016 and March 2017 alone. It was at Rs.40,546 in 2016 and touched the Rs.70,000 mark in 2017. As mentioned earlier the share price of MRF touched Rs.80,000 in April this year, which suggests an increase of Rs.10000. In FY 2017-18, the company also recommended a final dividend of Rs.54 per share. It had already paid two interim dividends of Rs.3 per share for the financial year ended 31 March 2018.
Investing in stocks needs patience and you can get great results only if you invest them for a longer time. The share price of MRF has shown a tremendous increase in over the years and it has a great potential to grow further. However, it is strongly recommended to do thorough research while investing in stocks as they are volatile in nature and there is a possibility that you will lose your hard-earned money due to a poor judgement or lack of research. There is ample amount of literature available on the websites like Bankbazaar.com about various kinds of stocks. Going through them can help the investor a great deal.