MRF's Multifold Jump in Bottomline Doesn't Excite Investors

India's most highly priced stock, MRF on Monday posted results for the quarter ended June 2021.

The tyre major reported an over 12-fold increase in its consolidated net profit to Rs 1.7 bn. This compared with a net profit of Rs 130 m reported in the April-June quarter of last year.

The low base in the year ago quarter was due to a total lockdown on account of the first wave of the pandemic.

Sequentially, profit declined 50%. In the March 2021 quarter, MRF had posted a net profit of Rs 3.3 bn.

MRF's topline rose to Rs 41.8 bn for the first quarter as against Rs 24.6 bn in the year ago period.

Total expenses during the quarter rose to Rs 40.5 bn. This was due to a rise in cost of raw materials.

MRF's EBITDA grew 49.2% to Rs 4.9 bn in the first quarter of the current financial year.

Its profit before exceptional items and tax stood at Rs 2.2 bn as against Rs 0.3 bn reported in the June 2020 quarter.

Here's a table comparing MRF's results on key parameters.

Financial Snapshot

(Rs bn)	Jun-21	Mar-21	Jun-20	YoY (%)	QoQ (%)
Revenue from operations	41.8	48.2	24.6	70%	-13%
Cost of materials	32.5	29.2	11.1	193%	11%
Total Expenses	40.5	44.3	24.8	63%	-9%
Profit after tax	1.7	3.3	0.1	1169%	-50%

Data Source: Company Filings

The company said its business was affected due to selective lockdowns declared in different parts of the country.

Considering the present and the future economic indicators, MRF does not foresee any incremental risk regarding recoverability of assets and ability to service financial obligations.

MRF has strong balance sheet and has serviced all its debt obligations in a timely manner.

Green energy strategy

Recently, the company said it's working on a multipronged '4R' strategy to improve sustainability of the industry. The 4Rs relate to reduce, recycle, reuse, and renewable.

MRF intends to reduce CO2 emissions by developing low-rolling resistance tyres, recycle end-of-lifecycle tyres as raw material for new tyres, reuse by promoting multiple retreaded tyres, and promote critical tyre raw materials from environmentally-sustainable sources such as biomass and waste materials.

To become more environment-friendly, the company has made some changes in the raw-material mix for two-wheeler and passenger car tyres.

On exports, MRF said it took a beating in the first half of last fiscal due to Covid-19 but then saw good traction leading to a spurt in overseas shipments.

MRF is also looking at developing raw materials jointly with domestic players, in a bid to cut dependence on imports.

As part of the import substitution initiative, the company is working on developing raw materials such as sulphur, butyl rubber, microcrystalline wax, and tackifier resin, among others, jointly with the domestic sources.

How the stock markets reacted to MRF's results

Ahead of its results yesterday, MRF share price rose 4% to Rs 82,020 on the BSE in intraday trade.

Today, the stock opened on a flat note at Rs 80,200 against its previous close of Rs 80,013.

It rose 1% to Rs 80,939 in early trade but erased gains thereafter.

Auto stocks are trading on a mixed note today with Escorts and Eicher Motors leading with gains.

MRF shares have a 52-week high quote of Rs 98,576 touched on 11 February 2021.

They have a 52-week low quote of Rs 55,360 touched on 24 September 2020.

Over the past one year, shares of the company have gained 28% as compared to 34% gains in BSE auto index.

At the current price of Rs 80,177, the company commands a marketcap of Rs 340 bn.

Promoters held 27.8% stake in the company as of 30 June 2021, while FIIs held 14.1% stake.

About MRF

MRF is India's largest tyre manufacturer. It's ranked among the top 20 global manufacturers, with 9 state-of-the-art factories across India.

It's also India's largest original equipment manufacturer (OEM) tyre supplier with an expansive tyre range from two-wheelers to fighter aircrafts.

MRF's liquidity position is good with healthy fund flow from operations and cash and liquid balances. Its average working capital utilisation has been low at 20% of the sanctioned limits in the last one year.

To know more about the company, check out MRF company fact sheet and quarterly results.

You can also compare MRF with its peers.

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MRF vs CEAT

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