Anand Rathi
MRF (Buy)
Target: ₹96,217
CMP: ₹80,299.95
We continue to be positive with regard to the outlook for MRF across segments. We expect the demand momentum to continue as we are experiencing unlocking of lockdowns in the South and in some parts of the country. We expect Q2 FY22 demand to grow strongly with expected normal operations at MRF. We expect revenue to grow 25 per cent y-o-y in FY22.
We expect OEMs and replacements to grow strong in FY22. While we saw 31 per cent y-o-y (4 per cent q-o-q) growth in Q4-FY21 to ₹4,730 crore, we expect growth to be strong in FY22. We believe that production constraints have been addressed and plants have started running from mid-May’21. Hence, we are of the view that demand for tyres will be addressed.
Our channel checks indicate that the company has raised prices in March, April and May by 1-2 per cent cumulatively. Also, we understand that supply issues with regard to rubber availability have eased for MRF. Therefore we believe that production will continue unhindered. Our channel checks also indicate that demand for tyres across segments remains strong; therefore we expect strong overall growth, led by the replacement category. We expect an 18 per cent revenue CAGR over FY21-23, and 28 per cent in earnings, leading to an EPS of ₹4,811.