Stock to SELL: Motilal Oswal sees Rs 16,000 downside in this stock; do you own it?

Stock to SELL: Shares of MRF remain expensive despite a strong December quarter performance, according to Motilal Oswal, which has reiterated a Sell rating on the stock. The brokerage has set a target price of Rs 1,29,151, implying a downside of about 11 per cent from the current market price of Rs 1,45,260.

MRF share price today

MRF shares settled at Rs 1,45,260, down Rs 1,195, or 0.82 per cent, from the previous close. The stock opened higher at Rs 1,47,000 and moved up to an intraday high of Rs 1,47,555. However, selling pressure emerged during the session, pulling the price down to a low of Rs 1,43,250.

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The tyre maker’s market capitalisation stood at about Rs 61.61 lakh crore. On a 52-week basis, the stock has traded between a high of Rs 1,63,600 and a low of Rs 1,02,124.05.

Strong Q3 performance

MRF reported a sharp earnings beat in Q3FY26. Adjusted profit after tax came in at Rs 7.3 billion, well ahead of Motilal Oswal’s estimate of Rs 5.5 billion. The outperformance was driven by strong operating performance.

EBITDA margin expanded sharply by 550 basis points year-on-year to 17.2 per cent, compared with the brokerage’s estimate of 15.3 per cent. Gross margin improved to 37.9 per cent, supported by easing rubber prices. As a result, EBITDA rose 70 per cent year-on-year and 25 per cent quarter-on-quarter to Rs 13.6 billion.

Standalone revenue increased 15 per cent year-on-year and 9 per cent sequentially to Rs 79.3 billion, largely in line with estimates. The company also reported an exceptional charge of Rs 772 million due to changes in labour codes. Adjusted for this, profit rose 140 per cent year-on-year.

Demand momentum to continue in Q4

Motilal Oswal said demand was strong across both OEM and replacement segments. OEM volumes grew in double digits, supported by pent-up demand after the GST cut in September 2025 and festive season buying.

The brokerage expects demand momentum to sustain in the March quarter. Channel filling is likely to support OEM volumes. Higher infrastructure spending is seen aiding commercial vehicle tyre demand. Over the longer term, the US–EU trade agreement could open export opportunities for MRF.

Valuation remains a concern

Despite the healthy outlook on demand and earnings growth, Motilal Oswal remains cautious on valuations. The brokerage expects MRF to deliver around 10 per cent revenue CAGR and 15 per cent earnings CAGR over FY25–FY28.

However, return ratios remain weak. RoCE has declined from 13 per cent in FY24 to 10 per cent in FY25 and is expected to improve only marginally to around 11 per cent by FY28. At current levels, the stock trades at 24.8 times FY27 estimated earnings and 22.1 times FY28 earnings, which Motilal Oswal views as expensive given the sub-par returns.

Brokerage view

Motilal Oswal has reiterated its Sell rating on MRF and maintained a target price of Rs 129,151, valuing the stock at 20 times December 2027 estimated earnings. The brokerage said strong near-term performance is already priced in, while limited improvement in return ratios caps upside from current levels.