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Informist, Tuesday, Feb. 4, 2025

By Steffy Maria Paul

MUMBAI – Despite a projected double-digit growth in revenue, MRF Ltd.'s earnings for the December quarter are expected to take a hit from high input costs. Brokerages expect margins of tyre companies to deteriorate further in the latest quarter due to a sharp increase in international natural rubber prices which were only partly offset by a sharp decline in domestic natural rubber prices.

For the December quarter, the net profit of the tyre maker is seen contracting 17% on year to INR 4.22 billion, according to an average of estimates from four brokerages. The estimates for net profit range from INR 4.08 billion by Anand Rathi Share and Stock Brokers Ltd. to INR 4.52 billion by Kotak Institutional Equities. 

MRF's net sales are expected to rise 12% on year to INR 67.74 billion for the latest quarter, the average of estimates from four brokerages showed. The lowest estimate for the top line was INR 66.93 billion by Elara Securities (India) Pvt. Ltd., while the highest was INR 68.34 billion by Motilal Oswal Financial Services Ltd. Sequentially, the revenue is expected to be flat, while the net profit is seen falling 7%.  

Brokerage Kotak Institutional Equities expects the company's revenue to rise on account of growth in volumes across segments, market share gains, and price hikes taken by the company. The company is expected to have gained market share in the quarter due to its aggressive pricing interventions, the brokerage said. 

Kotak expects the company to see an uptick in volumes across the two-wheeler and passenger vehicle original equipment manufacturer segments. The volumes in the replacement segments of passenger car radial tyres and truck, bus, and radial tyres also grew in the quarter, the brokerage said.

In the December quarter, natural rubber prices fell over 15% sequentially but rose 27% on year to INR 191.4 per kilogram, according to data from Kotak. The Tokyo generic first rubber price was up 9% sequentially and 43% on year at INR 214 per kg. The cost of raw materials is the biggest expense of MRF, which made up over 75% and 68% of its total expenses in the September and year-ago quarters respectively.

The company's earnings before interest, tax, depreciation, and amortisation for the December quarter is expected to be in the range of INR 9.10 billion to INR 9.61 billion, estimates from three brokerages showed.

Brokerages expect the company's EBITDA margin to contract sequentially during the quarter on account of higher input costs. The company had reported earnings before interest and tax margin, excluding other income, of 11.25% in the year-ago quarter. The company will detail its December quarter results on Thursday.

At 1356 IST, shares of the company traded at INR 114,299.85 on the National Stock Exchange, up 0.5%. The stock is down over 4% from the closing price on Nov. 8, when it detailed its September quarter earnings. In the September quarter, the company's net profit had declined 20% while its revenue rose 11% on year. Of the three brokerage reports on the company available with Informist, one has 'buy' rating on the stock, while the remaining two have a 'sell' rating on the stock.

Following are the Oct-Dec earnings estimates for MRF based on reports from four brokerage firms in descending order of net profit estimate (in INR million):

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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