International brokerage CLSA bumped its target price on tyremaker MRF Ltd.'s shares following the firm's positive earnings show for the quarter ended March.
CLSA decided to hike its target price on MRF's stock to Rs 1,68,426 per share, up from Rs 1,28,599, which indicates a 20 percent upside from the previous session's closing price, while maintaining its 'buy' rating.
MRF reported a 33 percent year-on-year increase in consolidated net profit for the January–March 2025 quarter, with profit rising to Rs 492.74 crore from Rs 370.52 crore a year earlier.
Revenue from operations grew 11.43 percent to Rs 7,074.82 crore in Q4 FY25, compared with Rs 6,349.36 crore in the same period last year. Further, the company's EBITDA margin swelled 337 basis points QoQ to 15 percent.
At 1.15 pm, shares of MRF were quoting Rs 1,40,000, marginally lower by 0.3 percent on the NSE.
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The brokerage believes this quarter marks the beginning of MRF's margin upcycle. "Domestic natural rubber prices are yet to correct, we believe, and should at margin expansion scope in the coming months," CLSA added. The brokerage also noted that MRF has consistently outshone its peers in the PCR (Passenger Car Radial) tyre segment, increasing market share by nearly 400 bps in the RBT segment.
CLSA also expects MRF's revenue to grow at a compound annual growth rate (CAGR) of 9 percent between FY25 and FY27, with margins projected to improve by 350 basis points from the FY25 level of 14.3 percent.
"We expect the execution of Gross Margin improvement in the fourth quarter, to act as a catalyst for a strong earnings CAGR of 33 percent over financial year 2025-2027, justifying the re-rating," CLSA added.
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