MRF Shares Rise After Q2 Results as Centrum Sees Margin Recovery

MRF’s Sales Growth Runs Into a Raw-Material Cost Squeeze

Higher costs cut into quarterly profit, while Centrum expects easing inputs to help margins recover.

Revenue growth could not keep pace with expenses

MRF reported a profit of ₹369 crore for the quarter ended September 30, down from ₹512 crore a year earlier. Revenue from operations increased nearly 18% to ₹8,524 crore, indicating that demand and sales held up even as the bottom line weakened.

The pressure came from costs. Total expenses grew by more than 22%, while the cost of materials consumed rose about 44%. The source attributed the increase in material costs largely to the impact of the conflict in the Middle East. Because expenses climbed faster than revenue, sales growth did not translate into higher quarterly profit.

Margin figures put commodity costs in focus

MRF’s revenue was in line with Centrum’s estimates, but gross margin declined by 100 basis points quarter on quarter, driven by commodity inflation. The company’s EBITDA margin was 10.7%. MRF has taken price increases and cost-management measures, which the brokerage said partially offset raw-material inflation.

Centrum’s assessment is that tyre-industry profitability, including MRF’s, is influenced substantially by commodity movements rather than structural improvement. That makes the direction of input costs an important variable for investors: price increases and internal cost controls can cushion a cost spike, but the quarter’s figures show that those measures did not fully prevent margin pressure.

The brokerage believes inflation in crude derivatives has been priced in and expects easing input costs to support margins. This is an expectation, not a reported outcome. Whether profitability improves will depend on how costs evolve and how effectively MRF’s pricing and cost actions offset them.

Centrum’s valuation case rests on a later earnings estimate

Centrum retained its Buy rating and ₹1,42,000 target price, valuing MRF at 20 times its estimated earnings per share for FY29. The target therefore reflects the brokerage’s assessment of future earnings, rather than the quarter’s reported profit alone. Investors should distinguish that forecast-based valuation from the company’s current operating performance.

MRF shares were up 0.74% at ₹1,26,030 on the NSE at 11:45, after touching an intraday high of ₹1,26,475, up 1.09%. The Nifty 50 was higher by 1.34% at the same time. The share move was modest against the broader index’s gain, and the available figures do not establish that the brokerage view alone drove the stock’s performance.

What investors should track from here

The key test is whether input-cost pressure eases enough for MRF to rebuild margins without weakening the benefit of its revenue growth. Investors can also watch whether the company’s price increases and cost-management steps continue to offset material inflation. The quarter illustrates the difference between strong sales and strong earnings: when costs rise faster than revenue, volume and top-line growth may not protect profit.

MRF also declared an interim dividend of ₹3 per share for the financial year ending March 31. The dividend is a separate return to shareholders and does not alter the central operating question raised by the results: how quickly margins can recover if the input-cost outlook improves.

Key Highlights

• MRF’s quarterly profit fell to ₹369 crore from ₹512 crore a year earlier.
• Revenue rose nearly 18% to ₹8,524 crore, while total expenses increased by more than 22%.
• Material costs grew about 44%; gross margin declined 100 basis points quarter on quarter.
• Centrum retained its Buy rating and ₹1,42,000 target, based on 20 times estimated FY29 EPS.
• MRF declared an interim dividend of ₹3 per share for the financial year ending March 31.

Investor Note: Centrum’s margin-recovery view depends on input costs easing and should be treated as a brokerage outlook, not a certainty. Investors may weigh that possibility against the latest fall in profit and monitor subsequent margin performance before drawing conclusions.