(Reuters) – Indian tyre maker MRF posted a near 40% fall in third-quarter profit on Thursday, as higher rubber costs outweighed steady demand for tyre, sending its shares more than 3% lower.
Standalone net profit was 3.07 billion rupees ($35.06 million) in the quarter ended Dec. 31, missing analysts’ average estimate of 4.2 billion rupees, according to LSEG data.
Revenue from operations rose 13.8% to 68.83 billion rupees, beating analysts’ average estimate of 67.33 billion rupees, while total expenses increased 20.6%.
MRF makes tyres for vehicles of Hyundai Motor India and Bajaj Auto, among others.
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KEY CONTEXT
Prices of rubber, a key raw material for tyre makers, rose in the December quarter, analysts said. Cost of materials consumed rose 23.8% to 46.34 billion rupees for MRF.
Total vehicle sales in India rose 3.1% year-on-year in the reported quarter, compared with a 19.5% jump in the year-earlier period. This weighed on tyre makers such as MRF, which depend on auto sales for a big chunk of their revenue.
Meanwhile, replacement demand, where customers change old or worn-out tyres with new ones, along with price hikes helped boost revenue, analysts said.
PEER COMPARISON
Valuation Estimates (next 12 Analysts’ sentiment
(next 12 months)
months)
RIC PE EV/EBI Revenue Profit Mean # of Stock to Div
TDA growth (%) growth (%) rating* analyst price yield
s target** (%)
MRF 21.83 10.36 10.78 12.94 Sell 4 0.95 0.17
CEAT 17.68 7.71 13.61 30.07 Buy 15 0.92 0.98
JK Tyre & 9.04 6.04 7.50 17.56 Buy 4 0.63 1.44
Industries
Apollo Tyres 13.97 6.87 7.49 26.97 Buy 22 0.80 1.42
* The mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
OCTOBER-DECEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 87.5575 Indian rupees
(Reporting by Meenakshi Maidas in Bengaluru; Editing by Subhranshu Sahu)
