MRF Ltd

Sector- Tyres &Allied

BUY
Market Data
Current Market Price (INR)
Target Price
Upside Potential
52 Week High/Low (INR)
Market Capitalization (In INR Cr)

13,828.00
15,810.00
14%
13920 /9521
5,863.00

Sha reholding

Non
Institution
57.73%

We rate MRF Limited a BUY. MRF (Madras Rubber Factory) is India's No.1 tyre
manufacturing company. It manufactures various tyres for passenger cars, two-wheelers,
trucks, buses, tractors, light commercial vehicles and off-the-road tyres. MRF is a market
leader in the tyre industry with a market share of ~ 27%. Currently, MRF exports tyres to
over 65 countries including America, Europe, Middle East, Japan, and the Pacific region. It
presently has overseas offices in Dubai, Vietnam and Australia.

Investment Highlights
Fall in rubber and Crude oil prices resulting in margin improvement for tyre companies:
Despite the falling rupee and sluggish demand, the correction in rubber prices and crude oil
prices are resulting in margin improvement for tyre companies. Domestic rubber and crude
oil prices have come down by 24.5% and 15.6% respectively from its peak.

DII
10.73%

FII
4.33%

Strong PAT Growth in H2 SepFY13:

The company has shown robust growth in profit in the half year ending Sep FY13. PAT of
the company has grown by 48.59% to INR390.8 crore in comparison to INR263 crore.
EBITDA margin of the company improved from 9.98% to 14.28% and PAT margin improved
from 4.8% to 6.59% on back of falling rubber and crude oil prices.

Promoter
and
Promoter
Group
27.21%

STOCK SCAN
BSE Code
NSE Code
Bloomberg Ticker
Reuters Ticker
Face Value (INR)
Equity Share Capital (In INR Cr)
Beta vs Sensex
Average Daily Volume
Dividend Yield
PEG Ratio

500290
MRF
MRF IN
MRF.BO
10.00
4.24
1.01
10,034
0.19%
N.A

Strong Research and development:

The company has managed to carry out the R&D activities efficiently and likely to do so in
the future. The R&D activity have helped the company in many ways like development of
new products for domestic and export market, development of new raw materials for specific
application, development of new formulation, development of new technique in making
process improvements, development of new equipment and modification of existing
machinery.

25000.00
20000.00
15000.00
10000.00
5000.00
0.00
24Apr12

24Jul12
CLOSE(MRFLtd.)

24Oct12

24Jan13

CLOSE(NIFTY)

SarojSingh
ExecutiveResearch
EmailIDssingh2@microsec.in

-124th April 2013

Microsec Research

Industry Snapshot

MarketshareIndianTyreIndustry(%)

Others
Tyre,26%
MRFTyre,27%
Ceat,12%

Apollo
Tyres,19%

JKTyre,16%

In India, ~65% of tyre demand comes from replacement market, in which the T&B (Truck
&Bus) segment contributes ~57% to the total volume. T&B tyre segment is highly
dominated by MRF, Apollo, CEAT and JK tyre. Currently top four players possess ~74%
market share in Indian tyre Industry.
Peer Group Comparison
Sales
FY12

Company

(23rd Apr
2012)
No.of
CMP
share

EBITDA EBITDA
ROE (%)
FY12
(%)
PAT FY12 PAT (%) EPS FY12 FY12
D/E

EPS
FY13E

MCAP

EPS
FY14E

P/E
FY13E

P/E
FY14E

*MRF Ltd

11,967

1,272

10.6

579

4.8

1,366.5

22.5

0.6

13828

0.42

5863

1773.0

1860.0

7.8

7.4

Apollo Ltd
Ceat Ltd
J K Tyres

12,153
4,649
6,947

1,166
282
329

9.6
6.1
4.7

410
18
-32

3.4
0.4
-0.5

8.13
5.3
-7.8

15.6
2.7
-4.0

1.0
1.9
3.0

92
103
115

50.41
3.42
4.10

4643
352
472

11.8
33.0
37.9

14.0
39.5
41.2

7.8
3.1
3.0

6.6
2.6
2.8

Source: ACE, Company Database. * MRF Ltd year ending on September. Financials in INR crore.

Automobile Domestic sales growth trends

Category
PassengerVehicles
CommercialVehicles
ThreeWheelers
TwoWheelers
GrandTotal

200607

200708
21%
33%
12%
12%
14%

200809
12%
5%
10%
8%
5%

200910
0%
22%
4%
3%
1%

201011
26%
39%
26%
26%
26%

201112
28%
29%
19%
26%
26%

201213
5%
18%
2%
14%
12%

3%
2%
5%
3%
3%

Valuation
At the CMP of INR13828, the stock is trading at a P/E of 7.8x its FY13E EPS of INR1773 and
7.4x its FY14E EPS of INR1860. The company has sound business model and ROE of 22.5%.
We assign a P/E multiple of 8.5x to its FY14E EPS to arrive at a Target price of INR15810 for
a time period of 12-15 months.

Key Concern
Tyre Industry is related with the automobile sector, if there is any slowdown in the auto
sector for a longer period of time, the demand of tyres will have a negative impact.

-224th April 2013

Microsec Research

MicrosecResearch:PhoneNo.:913330512100Email:microsec_research@microsec.in

AjayJaiswal:President,InvestmentStrategies,HeadofResearch:ajaiswal@microsec.in
FundamentalResearch

Name

Sectors

Designation

EmailID

NitinPrakashDaga

IT,Telecom&Entertainment

AVPResearch

npdaga@microsec.in

NaveenVyas
SutapaRoy

Midcaps,MarketStrategies
Economy

AVPResearch
ResearchAnalyst

nvyas@microsec.in
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BFSI

ResearchAnalyst

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MidCap

ResearchAnalyst

adas4@microsec.in

NehaMajithia
SoumyadipRaha

MidCap
MidCap

ResearchAnalyst
ExecutiveResearch

nmajithia@microsec.in
sraha@microsec.in

SarojSingh

MidCap

ssingh2@microsec.in

KapilBhati

MidCap

ExecutiveResearch
AssociateResearch
Executive

kbhati@microsec.in

Technical&DerivativeResearch
VinitPagaria

Derivatives&Technical

VP

vpagaria@microsec.in

RanajitSaha

TechnicalResearch

Sr.Manager

rksaha@microsec.in

InstitutionalDesk

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InstitutionalEquities

Sr.Manager

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InstitutionalDesk

Dealer

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AVP

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PMSSales

AVP

ksmehta@microsec.in

Research:FinancialPlanningDivision

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ManagerResearch

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FPDProducts

ResearchSupport
SubhabrataBoral

ResearchSupport

Asst.Manager
Technology

Recommendation

Expectedabsolutereturns(%)over12months

StrongBuy

>20%

Buy

between10%and20%

Hold

between0%and10%

Underperform

between0%and10%

Sell

<10%

sboral@microsec.in

MICROSECRESEARCHISALSOACCESSIBLEONBLOOMBERGAT<MCLI>
-324th April 2013

Microsec Research

Microsec Benchmark its Research

Benchmarking Fundamental Research
50.00%

As on 31st Mar 2013

45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Microsec Research

Nifty

CNX Midcap

An amount of ` 1,00,000 invested individually in all 196 stocks ie, ` 1,96,00,000 investment as and
when recommended has appreciated to ` 2,54,17,093 giving a return of 29.7 percent. On the same
basis Nifty has given a return of 9.2 percent and CNXMID CAP has given a return of 9.6 percent.

Microsec benchmark its Research and the same is updated on our website at www.microsec.in.
Come, strike the right balance through Benchmarking Research.

Plan and monitor your resources through

www.prpsolutions.com

Recommendation

Expected absolute returns (%) over 12 months

Strong Buy

>20%

Buy

between 10% and 20%

Hold

between 0% and 10%

Underperform

between 0% and -10%

Sell

< -10%

Disclaimer
Theinvestmentsdiscussedorrecommendedinthisreportmaynot besuitableforallinvestors.Investorsshouldusethisresearchasoneinputintoformulating
aninvestmentopinion.Additionalinputsshouldinclude,butarenotlimitedto,thereviewofother.Thisisnotanoffer(orsolicitationofanoffer)tobuy/sellthe
securities/instrumentsmentionedoranofficialconfirmation.MicrosecCapitalLimitedisnotresponsibleforanyerrororinaccuracyorforanylossessufferedon
accountofinformationcontainedinthisreport.Thisreportdoesnotpurporttobeofferforpurchaseandsaleofshare/units.Weandouraffiliates,officers,
directors,andemployees,includingpersonsinvolvedinthepreparationorissuanceofthismaterialmay:(a)fromtimetotime,havelongorshortpositionsin,
andbuyorsellthesecuritiesthereof,ofcompany(ies)mentionedhereinor(b)beengagedinanyothertransactioninvolvingsuchsecuritiesandearnbrokerage
orothercompensationdiscussedhereinoractasadvisororlenderIborrowertosuchcompany(ies)orhaveotherpotentialconflictofinterestwithrespectto
-4anyrecommendationandrelatedinformationandopinions.Thesamepersonsmayhaveactedupontheinformationcontainedhere.Nopartofthismaterial
maybeduplicatedinanyformand/orredistributedwithoutMicrosecCapitalLimitedpriorwrittenconsent.

24th April 2013

Microsec Research