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MRF Ltd: Net profit down 35% - Views on News from Equitymaster
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  • Dec 23, 2000

    MRF Ltd: Net profit down 35%

    MRF Ltd has reported a decline of 35% YoY in its net profit to Rs 641 m for FY00 as compared to Rs 986.7 m for FY99. This is despite a 2% growth in turnover in FY00.

    (Rs m) FY99* FY00* Change
    Sales 23,083 23,522 1.9%
    Interest 682 643 -5.7%
    Depreciation 1,067 1,078 1.1%
    Profit after Tax/(Loss) 986.7 640.6 -35.1%
    Net profit margin (%) 4.3% 2.7%
    No. of Shares (eoy) (m) 4.2 4.2
    Diluted number of shares 4.2 4.2
    Diluted Earnings per share 232.7 151.1
    * Year ended 30th September 1999 and 2000

    The recession across all sectors in the automobile industry has resulted in low demand from the tyre industry. MRF Ltd India's largest radial manufacturer as a result too has reported a lower turnover growth. Higher raw material expenses in the current year at Rs 1,093 m grew by 6% YoY as compared to Rs 1,036 m in FY99. As a percentage of sales raw material expenses have gone up from 46% in FY99 to 49% in FY00. The major components of raw material, rubber and carbon black have both seen an increase in prices in the current year. All these factors have resulted in a decline in the company's net profit for FY00.

    As a result of change in method of valuation of inventory, the value of inventories and the net profit has declined in the current year by Rs 66 m. This too has contributed to the decline in net.

    In FY00 to expand its client base the company has turned to other segments for business. They have received orders from State Transport Undertakings and higher orders from the army. The company's exports went up from Rs 1,513 m in FY99 to Rs 1,733 in FY00 a growth of 15%, this helped the companys' turnover and bottomline to some extent, which reeled under declining domestic volumes.

    On the current price of Rs 1,164 MRF is trading at 7.7x FY00 EPS of Rs 151.We expect the share price to be lacklustre on the back of the above results. Also there are no signs of improvement for the 1st quarter FY01 results which are expected in January 2001.



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