Buy MRF; target of Rs 12129: Firstcall Research

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Firstcall Research is bullish on MRF and has recommended buy rating on the stock with a target of Rs 12129 in its November 30, 2012 research report.

“Established as toy-balloon manufacturing company in 1946 by KM Mammen Mappillai, MRF quickly emerged as the leading maker of tread rubber. Since then, the company hasn't looked back. A leader in the category MRF holds the No.1 position for the last 21 years. The fact that it is the first tyre company in India to reach a turnover of 5000 Crores is testament to its dominance of the industry. The Company is engaged mainly in the manufacture of Rubber Products such as Tyres, Tubes, Flaps, Tread Rubber and Conveyor Belt. MRF uses cutting - edge technologies in predictive testing and design validation before it leaves the drawing board. These advances have significantly brought down the time to market for new designs. Advanced raw materials are tested and approved in our NABL accredited laboratories."

"MRF works closely with global suppliers in using the latest developments in materials across the globe. Our laboratories which have the very latest in testing equipment closely monitor the quality of the material going into our tyres at the time of approval and regularly after that. The prototypes for verification and validation testing are manufactured in one of MRF's 6 factories all of which are TS 16949/ISO 9001 certified. The tyres then go through testing for confirming the architecture and a series of indoor testing to ensure that they meet MRF's tight standards and also those required by the OEM or by any of the national standards like BIS/JIS/ETRTO/T&RA.”

“MRF LTD is a leader in the category holds the No.1 position for the last 21 years. It is the first tyre company in India to reach a turnover of 5000 Crores. The Company is engaged mainly in the manufacture of Rubber Products such as Tyres, Tubes, Flaps, Tread Rubber and Conveyor Belt, reported its financial results for the quarter ended 30 Sep, 2012. The fourth quarter witnesses a healthy increase in sales is slumped up on account of an enhanced Dealers network and robust infrastructural Support system. The company’s net profit slump to Rs.1647.60 million against Rs.3954.40 million in the corresponding quarter ending of previous year, an decrease of 58.34%. Revenue for the quarter rose by 14.27% to Rs.29936.20 million from Rs.26197.90 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.388.58 a share during the quarter, registering at 58.34% decrease over previous year period. Profit before interest, depreciation and tax is Rs.3696.90 millions as against Rs.1832.50 millions in the corresponding period of the previous year.”

“At the current market price of Rs.10733.95, the stock P/E ratio is at 7.38 x FY13E and 6.84 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.1454.69 and Rs.1569.04 respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 8% over 2011 to 2014E respectively. Price to Book Value of the stock is expected to be at 1.31 x and 1.10 x respectively for FY13E and FY14E. The fourth quarter witnesses a healthy increase in overall sales and profit slumped down on account of powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 12129 for medium to long term investment,” says Firstcall Research report.  

Public holding more than 90% in Indian cos

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