MRF Share Price Achieves Rs 1 Lakh Milestone, Becomes First Stock on Dalal Street

On Tuesday, MRF, a renowned tire manufacturer, made history on Dalal Street by becoming the first stock to surpass the Rs 1 lakh mark. The shares of MRF experienced a surge of 1.37% and reached a new 52-week high of Rs 100,300 on the BSE.

Previously, in May, MRF came close to reaching the Rs 100,000 mark in the spot market but managed to surpass this psychologically significant level in the futures market on May 8, by a narrow margin of only Rs 66.50.

In India, MRF holds the distinction of having the highest-priced stocks. The second position is occupied by Honeywell Automation, with shares priced at Rs 41,152 on the market. Following closely are Page Industries, Shree Cement, 3M India, Abbott India, Nestle, and Bosch.

However, it is important to note that a high stock price does not necessarily make MRF the most expensive stock in India. Investors assess the value of securities based on metrics such as price-to-earnings (PE) ratio or price-to-book value (PB) ratio.

Based on the trailing 12-month data, MRF shares were trading at a PE ratio of 55.2 times earnings. Retail investors often confuse the stock’s price with its valuation and mistakenly label MRF as the most expensive stock.

While stock splits can reduce the price of individual shares, MRF has never implemented such a strategy. The Chennai-based company has a total of 42,41,143 shares, out of which 30,60,312 shares are held by public shareholders, constituting 72.16% of the total equity. The promoters own 11,80,831 shares, representing 27.84% of the total equity.

The high ticket price of MRF shares often dissuades retail investors from investing. As of the end of the March quarter, retail shareholding in MRF, defined as investments below Rs 2 lakh, accounted for 12.73% of the total. Approximately 40,000 small investors own shares of MRF.

Over the past three months, the stock, with a market capitalization of around Rs 42,500 crore, has experienced a rally of over 20%.

Fundamental Outlook:

According to data from Trendlyne, out of the seven analysts covering MRF, five have given sell ratings.

Motilal Oswal and Kotak Institutional Equities, who hold bearish views on MRF, previously set price targets of Rs 75,400 and Rs 66,000, respectively.

Motilal stated, “MRF’s competitive position within the sector has weakened over the past few years, which is also reflected in the dilution of pricing power in the PCR and TBR segments. This, combined with the impact of planned capital expenditure, is expected to result in limited expansion in return ratios.”

Anand Rathi, a brokerage firm that recommends holding MRF shares with a target of Rs 96,000, believes that the stock has limited upside potential from the current market price.

“For MRF, replacement demand will gradually recover as economic activity improves and the impact of the high base fades. Original Equipment Manufacturer (OEM) demand is expected to be strong at high single-digit growth. We anticipate a 6% volume growth over FY23-25. EBITDA margins are expected to stabilize from Q4 as most of the benefits from lower input costs have already been factored in,” the firm said.