MRF 2017-18 Annual Report Analysis

Sat, 31 Mar

MRF has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

MRF Income Statement Analysis

• Operating income during the year rose 22.3% on a year-on-year (YoY) basis.
• The company's operating profit decreased by 13.5% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 15.7% in FY18 as against 22.2% in FY17.
• Depreciation charges increased by 15.7% and finance costs increased by 0.8% YoY, respectively.
• Other income declined by 0.1% YoY.
• Net profit for the year declined by 23.9% YoY.
• Net profit margins during the year declined from 12.5% in FY17 to 7.8% in FY18.

MRF Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	118,953	145,438	22.3%
Other income	Rs m	3,310	3,307	-0.1%
Total Revenues	Rs m	122,262	148,744	21.7%
Gross profit	Rs m	26,456	22,875	-13.5%
Depreciation	Rs m	6,106	7,067	15.7%
Interest	Rs m	2,566	2,587	0.8%
Profit before tax	Rs m	21,094	16,527	-21.7%
Tax	Rs m	6,232	5,210	-16.4%
Profit after tax	Rs m	14,862	11,316	-23.9%
Gross profit margin	%	22.2	15.7
Effective tax rate	%	29.5	31.5
Net profit margin	%	12.5	7.8

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MRF Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 46 billion as compared to Rs 45 billion in FY17, thereby witnessing an increase of 2.0%.
• Long-term debt stood at Rs 13 billion as compared to Rs 12 billion during FY17, a growth of 6.5%.
• Current assets rose 8% and stood at Rs 79 billion, while fixed assets rose 11% and stood at Rs 86 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 165 billion as against Rs 150 billion during FY17, thereby witnessing a growth of 10%.

MRF Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	86,408	97,382	12.7
Current Liabilities	Rs m	45,020	45,899	2.0
Long-term Debt	Rs m	12,383	13,193	6.5
Total Liabilities	Rs m	150,482	164,782	9.5
Current assets	Rs m	73,136	78,745	7.7
Fixed Assets	Rs m	77,345	86,037	11.2
Total Assets	Rs m	150,482	164,782	9.5

MRF Cash Flow Statement Analysis

• MRF's cash flow from operating activities (CFO) during FY18 stood at Rs 24 billion, an improvement of 23.4% on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs -20 billion, an improvement of 44.6% on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs -5 billion on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs -535 million from the Rs 1 billion net cash flows seen during FY17.

MRF Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	19,557	24,130	23.4%
Cash Flow from Investing Activities	Rs m	-13,927	-20,139	-
Cash Flow from Financing Activities	Rs m	-4,376	-4,526	-
Net Cash Flow	Rs m	1,254	-535	-

Current Valuations for MRF

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 2,668.9, an decline from the EPS of Rs 3,505.2 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 72,300.7, stands at 28.1 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 3.1 times, while the price to sales ratio stands at 2.1 times.
• The company's price to cash flow (P/CF) ratio stood at 15.5 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	28,054.8	34,301.4
TTM Earnings per share	Rs	3,505.2	2,668.9
Diluted earnings per share	Rs	3,504.3	2,668.2
Price to Cash Flow	x	12.3	15.5
TTM P/E ratio	x	17.7	28.1
Price / Book Value ratio	x	2.2	2.9
Market Cap	Rs m	194,167	285,424
Dividends per share (Unadj.)	Rs	60.0	60.0

Ratio Analysis for MRF

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 1.7x during FY18, from 1.6x during FY17. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 7.4x during FY18, from 9.2x during FY17. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 11.6% during FY18, from 17.2% during FY18. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at 17.3% during FY18, from 23.9% during FY17. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 8.4% during FY18, from 11.6% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	1.6	1.7
Debtors’ Days	Days	6	5
Interest coverage	x	9.2	7.4
Debt to equity ratio	x	0.1	0.1
Return on assets	%	11.6	8.4
Return on equity	%	17.2	11.6
Return on capital employed	%	23.9	17.3

To see how MRF has performed over the last 5 years, please visit here.

MRF Share Price Performance

Over the last one year, MRF share price has moved up from Rs 60,723.9 to Rs 72,300.7, registering a gain of Rs 11,576.9 or around 19.1%.

Overall, the S&P BSE SENSEX is up 12.1% over the year.

(To know more, check out historical annual results for MRF and quarterly results for MRF)

Read: Latest Annual Report Analysis of MRF