MRF Q4 Results Review - Weak Operational Performance: Motilal Oswal

Motilal Oswal Report

MRF Ltd.’s Q4 FY24 result was weak as higher raw material costs and operating expenses led to lower adjusted Ebitda margin of 16.2% (-100 basis points QoQ versus estimate 17%).

A provision of Rs 463.6 million, which was made in FY23, was recognized in Q4 along with the additional provision of Rs 981.4 million for FY24 to cover extended producer responsibility costs. We believe EPR costs would be recurring in nature, which, combined with rising raw material costs, could hurt Ebitda margin in the upcoming quarters.

We lower our FY25E/FY26E consolidated earnings per share by 12%/10% to factor in commodity headwind and EPR provisions.

We maintain Sell with a target price of Rs 92,000 (18 times March-26E EPS), as the stock trades at 25 times FY26E EPS (above its 10-year long period average of ~22 times), which we believe does not reflect its weakening competitive position and deteriorating return profile.

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