Indian tyre maker MRF beats Q2 profit view on higher replacement demand

JK Tyre & Industries

08/11/2024 07:17

Nov 8 (Reuters) - Indian tyre maker MRF  MRF.NS  reported better-than-expected second-quarter profit on
Friday, as stronger replacement demand from retail customers outpaced muted sales to carmakers.
    The company's consolidated net profit fell 20.4% to 4.55 billion rupees (nearly $54 million) for the quarter
ended Sept. 30, but it beat analysts' average estimate of 4.25 billion rupees, according to data compiled by
LSEG.
    
    KEY CONTEXT
    Indian tyre makers have seen their quarterly profits decline between July and September, hurt by weak demand
from car, trucks and bus makers, often their biggest revenue source.
    However, replacement demand - where customers replace older vehicle parts with newer ones - remained steady
during the reported quarter.
    This helped outpace weak demand from carmakers, whose sales to dealers fell for the first time in 10 quarters
as demand cooled due to heavier-than-usual rains, while large trucks and buses sales dropped 12% in the reported
period.
    Also, the pre-festive season period, an inauspicious time for big-ticket purchases, fell entirely in
September this year versus October in 2023.   
    Analysts also estimate domestic rubber prices jumped 20%, eating into the tyre makers' margins.
    
    PEER COMPARISON
      
                                   Valuation (next    Estimates (next 12        Analysts' sentiment          
                                      12 months)           months)                                       
                          RIC       PE    EV/EBITDA   Revenue     Profit     Mean     # of    Stock to     Div
                                                     growth (%)  growth(%)  rating*  analyst    price     yield
                                                                                        s     target**     (%)
         MRF            MRF.NS     23.54    11.46       9.25       6.79      Sell       4       1.07       0.16
        CEAT            CEAT.NS    16.01    7.67       10.25       14.03      Buy      15       0.88       1.08
      JK Tyre &         JKIN.NS    11.50    7.15        6.33       10.64      Buy       5       0.75       1.15
     Industries                                                                                          
    Apollo Tyres        APLO.NS    17.56    7.65        8.42       16.38      Buy      23       0.91       1.22
 * Mean of analysts' ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
 ** Ratio of the stock's last close to analysts' mean price target; a ratio above 1 means the stock is trading
above the PT
    
    JULY TO SEPTEMBER STOCK PERFORMANCE   
-- All data from LSEG
-- $1 = 84.3690 Indian rupees

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JULY TO SEPTEMBER STOCK PERFORMANCE    https://tmsnrt.rs/3YBhgPC
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 (Reporting by Kashish Tandon in Bengaluru; Editing by Rashmi Aich)
 ((Kashish.Tandon@thomsonreuters.com; 8800437922;))