This stock skyrocketted by Rs 1,000 Monday; here is how you can become a crorepati; guess what! It is seen rising Rs 11,000 going forward
At around 14:32 hours on Monday, the company was trading at Rs 68,301 per piece, up by Rs 785 or 1.12%. However, so far in the day, the company has touched an intraday high of Rs 68,611.65 per piece which makes it overall gains by Rs 1068 or 1.58%. But the stock managed to finish at Rs 68013.40 during the day.
While almost everything was soaring on Dalal Street today, there was one company which was soaring even higher than the benchmark indices Sensex and Nifty 50. Yes, you have read it right! A company has made many investors quite rich today, and the amount of performance it has shown is breathtaking. This stock is one of the leading tyre manufacturers, MRF and it has just given a massive return to its investors. The company has soared by over Rs 1000 alone on Monday.
At around 14:32 hours, the company was trading at Rs 68,301 per piece, up by Rs 785 or 1.12%. However, so far in the day, the company has touched an intraday high of Rs 68,611.65 per piece which makes it overall gains by Rs 1068 or 1.58%. But the stock managed to finish at Rs 68013.40 during the day. If this news has whetted the appetite of other investors, then they should know that this stock is already a very expensive purchase. But, guess what! The company is seen gaining another over Rs 11,000 going forward! Yes, its breathtaking and, you surely are bound to become crorepati if you shower some love on MRF.
Madras Rubber Factory (MRF) Limited commonly known as MRF embarked on its journey on stock exchanges on September 18, 1996, and since then its has touched various milestones and became the most expensive stock on the indexes.
The company has turned out to largest manufacturer of tyres in India and has also increased it footholds in businesses like rubber products including tyres, treads, tubes and conveyor belts, paints and toys.
MRF has already made its investors quite rich in just one year’s time. On this day last year, the MRF share price stood near Rs 70,215-level, and it has touched an all-time high of Rs 81, 423 per piece on April 30, 2018 which makes an overall growth of nearly 16%.
However, last month, the company has given away its glorious days and even nosedived to all-time low of Rs 59,494 on October 08, 2018. This surely would make an investor panic, but if you look closely the all-time low was on the back of bear market which both Sensex and Nifty witnessed together due to weak rupee and rising crude oil prices. This meant that MRF was not alone in tumbling zone, in fact entire sectors on these indices saw massive selling pressure.
As an investment tip, one should always remember when there is a crash in markets, companies are bound to drop but that comes as an opportunity to valued investors as these stocks witness price correction and becomes a fair valuation to purchase.
For example, when MRF clocked the low of Rs 59,494.60 in October month, it has bounced back by over 15%. This gain is in just nearly two months time.
MRF, which was trading below Rs 500 per share on August 24, 2001, has given a return of whopping 16,184.6% or over 162 times if we look at its all-time high. The potential of MRF share price is definitely something to eye with greed.
Recently, Deutsche Bank noted that tyre stocks have continued volume growth across companies. Price hikes taken to counter commodity cost pressures.
Analysts at Deutsche for MRF said, “Maintained ‘Buy’ with a price target of Rs 80,000, implying a potential upside of 21% from the last regular trade.” This forecast is for till FY21.
Hence, you are bound to become crorepati if you have invested in MRF share price.
Compared to its peers, MRF share price has earning per share of Rs 2,852.08 along with P/E of 23.95, whereas Balkrishna Industries has EPS of Rs 43.23 with P/E of 22.34, Goodyear has EPS of Rs 14.87 with P/E of 19.62, Apollo Tyres has EPS of Rs 10.96 with P/E of 16.01, CEAT has EPS of Rs 10.05 with P/E of 14.99 and JK Tyre has EPS of Rs 5.44 with P/E of 9.25.
During Q2FY19, MRF witnessed 9.38% growth in revenue from operations which stood at Rs 3,928.16 crore compared to Rs 3,591.11 crore recorded in the corresponding period of previous year. However, the company's net profit tumbled by 12.26% to Rs 263.04 crore versus net profit of Rs 299.92 crore in Q2FY18.
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Talking about Q2FY19 performance, IDFC Securities said, “Revenue growth yoy was visibly lower than that of peers (CEAT +15%) for a second quarter in a row – this may be reflective of market share losses due to radialisation (where MRF has a lower markets share). However, the gross margins of the company (39.7%) remained flat at on a sequential and yoy basis despite significant cost pressures – this seems to reflect an improvement in product mix/price hikes to offset cost pressures. The stronger than expected improvement in gross margins was partially negated by an increase in other expenses – possibly reflecting higher advertisement expenses. We note that other expenses do tend to be lumpy in nature. Consequently, EBITDA margins at 14.8% (down 90 bps yoy) were just a tad ahead of expectations.”
MRF’s management indicated that tyre volume growth could be between 8-10% with OEM growth at 8-10% whilst the replacement market could grow at 6-8%.
That time, IDFC Securities said, ‘We expect MRF to report 29% EPS CAGR over FY18-20E and revenue CAGR of 12%. With strong competitive advantages (distribution network, brand equity and economies of scale) and a shift in pricing strategy, we believe that the premium valuations for MRF (~15x FY20 EPS versus 11-13x for peers) are justified. MRF, unlike peers, has not raised any capital in the past decade, despite strong EPS growth, which is comforting. We value MRF at 17x FY20 earnings. Maintain Outperformer with target price of Rs73,000.”’
From the above, one detail is quite sure MRF is a money making magnet. If you plan to reap the benefit of this company then you should know the above mentioned factors. MRF is definitely one of its kind. This company is also the second highest valued stock on exchanges.
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