CLSA Sees 20% Upside in MRF Shares Post Q4 Earnings Beat, Lifts Target to ₹1.68 Lakh

CLSA Upgrades Target Price on Strong Profit Growth and Margin Expansion

Global brokerage firm CLSA has revised its target price on MRF Ltd. shares, citing a stronger-than-expected earnings performance in the January–March 2025 quarter. CLSA now sees the stock hitting ₹1,68,426, a significant jump from its earlier target of ₹1,28,599. This implies a potential upside of around 20% from MRF’s last traded price of ₹1,40,000 on the NSE, where it was marginally down 0.3% as of 1:15 pm on May 8. The brokerage has maintained its ‘Buy’ rating, highlighting MRF’s emergence into a margin expansion cycle and robust earnings trajectory.

Highlights:

• CLSA hikes target to ₹1,68,426 from ₹1,28,599; maintains ‘Buy’ rating.

• 20% potential upside seen from May 8 closing price of ₹1,40,000.

• Brokerage notes MRF’s entry into a margin upcycle.

Q4 FY25 Earnings: Profit Soars 33%, EBITDA Margins Improve Sharply

MRF reported consolidated net profit of ₹492.74 crore for Q4 FY25, a 33% rise from ₹370.52 crore in the same period last year. Revenue also saw an 11.43% YoY uptick to ₹7,074.82 crore, compared to ₹6,349.36 crore a year earlier. The EBITDA margin surged 337 basis points sequentially to 15%, marking a solid operational performance. CLSA attributes this margin resilience to stable pricing, softening cost inputs, and operating leverage benefits during the quarter.

Highlights:

• Net profit at ₹492.74 crore, up 33% YoY.

• Revenue at ₹7,074.82 crore, up 11.43% YoY.

• EBITDA margin expands QoQ by 337 bps to 15%.

CLSA Bullish on PCR Segment Leadership and Market Share Gains

CLSA further noted that MRF’s sustained outperformance in the Passenger Car Radial (PCR) tyre segment is critical to its long-term growth. The company has reportedly expanded its market share by nearly 400 basis points in the RBT (Replacement Bias Tyres) segment. This leadership in high-margin tyre categories bodes well for earnings momentum, especially as raw material inflation stabilizes.

Additionally, CLSA expects domestic natural rubber prices, which have remained elevated, to begin moderating, providing more headroom for margin improvement in the upcoming quarters. The brokerage sees this trend as the beginning of a structural upcycle in profitability for the company.

Highlights:

• Market share gain of ~400 bps in high-margin RBT segment.

• Expected correction in domestic natural rubber prices to support margins.

• Structural profitability upcycle identified.

FY25–FY27 : Double-Digit Growth and Earnings Re-Rating Expected

CLSA projects that MRF’s revenue will grow at a CAGR of 9% between FY25 and FY27, supported by rising demand in the PCR segment and pricing stability. More notably, EBITDA margins are expected to expand by 350 basis points from FY25 levels of 14.3%, further strengthening the bottom line. The brokerage forecasts an earnings CAGR of 33% for FY25–FY27, which it believes will justify a re-rating of the stock, supporting the aggressive target hike.

Highlights:

• Revenue CAGR of 9% expected between FY25–FY27.

• EBITDA margin to improve by 350 bps from FY25 base.

• Earnings CAGR of 33% projected, aiding stock re-rating.