From Rs 500 to Rs 50,000 in 15 years, how MRF scripted a wealth-creation story

By: | Updated: September 28, 2016 4:02 PM

MRF shares soared 9,900 per cent, or 100 times, to record high of Rs 50,000 on September 28, 2016, from Rs 500 in August 2001, thus becoming the most expensive stock in India.

Steel Strips Wheels, Sarda Energy & Minerals, Reliance Capital, Raymond, Kirloskar Oil Engines, KNR Constructions, MRF, Orient Refractories, Rama Steel Tubes, Kesoram Industries, Kaushalya Infrastructure Development Corporation, Indian Metals & Ferro Alloys, Dalmia Bharat, Eicher Motors and Energy Development Company were among 69 stocks that hit fresh 52-week high on NSE. (Photo: PTI)MRF shares soared 9,900 per cent, or 100 times, to record high of Rs 50,000 on September 28, 2016, from Rs 500 in August 2001, thus becoming the most expensive stock in India. (Photo: PTI)

‘Patience is a key to success’, the statement comes true for those equity investors who invested in MRF shares in August 2001 and held on. Shares of the tyre manufacturer soared 9,900 per cent, or 100 times, to record high of Rs 50,000 on September 28, 2016, from Rs 500 in August 2001, thus becoming the most expensive stock in India in terms of share price followed by Eicher Motors (Rs 25,741.80), Bosch (Rs 23,209.60), Shree Cement (Rs 16,840), Page Industries (Rs 15,333) and 3M India (13, 177.75). During the period, standalone net profit of MRF Ltd soared to Rs 2,327.72 crore in 2015-16 from Rs 31.74 in FY2001. On the other hand, top line of the company jumped from Rs 1714 crore to Rs 20217.95 crore during the same period. At present, shares of the company are trading at trailing twelve months price-to-earnings ratio of 11.52 times against industry P/E multiple of 11.90.

Market experts do not see any increase in input costs in the next few quarters. According to India Rating and Research, the revenue growth of major tyre manufacturers is likely to be in the range of 3-6 per cent in 2016-17, with higher volume growth negating the year-on-year decline in pricing. Companies could see a moderation in EBITDA margins, due to the recent increase in input costs as well as pricing pressures. The recent increase in rubber prices is likely to impact the profitability of tyre companies on a quarterly basis. But, the trend of increase in prices is unlikely to be sustained and prices will stabilise at the current levels due to the prevailing rubber demand-supply dynamics. Crude oil prices have also increased from the low levels seen in February 2016, but are unlikely to increase further. Thus, tyre companies will not face increased input pressure over the next 12 months. Marginal deterioration in the credit profile is likely for some companies undertaking capex.

On Thursday, shares of the company closed 6.73 per cent higher at Rs 49,734. The scrip opened the day at Rs 46,701 and touched a high and low of Rs 50,000 and Rs 46,701, during the day.

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