MRF shares hit Rs 1,00,000 mark; what's next for the costliest stock on Dalal Street?

MRF shares achieved an astounding feat during the trading session on Tuesday as the tyre maker became the first Indian shares to hit the Rs 1 lakh mark. Shares of MRF gained more than a per cent during the early trading session to hit the six-digit mark, making history at Dalal Street.

Shares of MRF advanced more than 1.3 per cent on Tuesday to Rs 1,00,300 mark on Tuesday before giving up their gains partially. The company was commanding a total market capitalisation of close to Rs 42,500 crore. The scrip had settled at Rs 98939.70 on Monday.

Shares of MRF have gained more than 45 per cent in the last one year, while the stock is up 52 per cent from its 52-week lows at Rs 65,900. The stock has delivered a return of 82 per cent in the last three years.

The tyre manufacturer reported an 86 per cent jump in consolidated net profit at Rs 313.5 crore for the quarter ending March 31, 2023. It reported a consolidated net profit of Rs 168.5 crore in the year-ago period. The company had also announced a dividend of Rs 169 apiece for the investors.

MRF’s consolidated revenue from core operations rose 10 per cent to Rs 5,842 crore for the fourth quarter ended March 2023 as compared to Rs 5,305 crore a year ago. Other income of the company rose marginally to Rs 70 crore as against Rs 66 crore a year ago.

Shares of MRF are trading at a price-to-earnings (P/E) multiple of 55 times, while it is trading at a price-to-book value (P/BV) multiple of 2.89 times. Its return on equity (RoE) stands at 5.35 per cent, while its return on capital employed (RoCE) is seen at 7.94 per cent.

Promoters own a 27.84 per cent stake in the company as of March 31, 2023, while the remaining 72.16 per cent stake is with public shareholders including 18.05 per cent with FIIs and 11.66 per cent with DIIs. However, promoter pledging is only 0.09 per cent, the data suggests.

The consensus recommendation from nine analysts for the stock is a strong sell, the Trendlyne data suggests. Kotak Institutional Equities pegs its fair value at Rs 66,000, close to its 52-week lows. Motilal Oswal, in its report released in May 2023, suggested to 'sell' the tyre maker with its target price of Rs 75,400.

However, technical analysts, decoding the charts, think otherwise. MRF, on its quarterly charts, has been in a strong uptrend from the levels of 1470, by making higher tops & higher bottoms formation. This stock structurally is in a multiyear bull run and it’s more of an investment bet than trading, said Sujit Deodhar, Head Technical Analyst at Wellworth Share & Stock Broking.

At the current juncture, the stock is trading at its lifetime highs & heading to test its resistance levels placed at Rs 1,02,795. A quarterly close above the resistance levels will open a massive upside in this stock as technical indicator MACD exhibits a fresh buy signal, with the target projected at Rs 1,47,725 levels, he said.

"So, investors holding on to this stock should continue to hold on to their long positions and any dip towards Rs 89,000-90,000 levels (200DMA) should be utilized as a buying opportunity to add more to their portfolio," Deodhar added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)