MRF Q3 Results Review - Margins Likely To Have Peaked Out: Motilal Oswal

Motilal Oswal Report

MRF Ltd.’s Q3 FY24 operating performance was below est. as higher raw material costs and higher expenses dented overall margins, which stood at 17.2% (versus est.18.2%).

We believe MRF's margins are likely to have peaked out at current levels and expect stable margins over FY24-26E.

We lower our FY24E earnings per share by 4% to factor in weak volume growth across commercial vehicle/passenger vehicle category, while maintaining our FY25E EPS estimates.

We reiterate our 'Sell' rating on the stock with a target price of Rs 106,760 (18 times March-26E EPS) as the stock trades at 25.6 times FY25E EPS (above its 10-year long period average), which does not reflect its weakening competitive position and similar return ratios versus its peers.

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