MRF Limited (MRF.NS) fair value

ACCE thesis

MRF Limited makes tyres for passenger cars, trucks, two-wheelers and off-road vehicles, along with the Sprint, Mobile Care and Chakra Tyres brands and a line of tyre retreading and steel cord products. Its gross margin of 35.8% sits well above the operating margin of 6.5%, so the cost base is heavy in distribution, promotion and overheads, which is where a brand-led business like this one earns or loses its pricing power. Revenue growth of 9.6% is the number to watch against replacement-demand cycles, input costs for natural rubber and synthetic rubber, and the replacement tyre market that makes up much of the volume. At 20.9 times trailing earnings and 17.8 times forward, the market is pricing in a modest step-up in earnings, which makes the margin trajectory the swing factor for whether the name merits a deeper look. Return on equity is not available in the data, so the capital efficiency case needs to be built from the filings rather than from the screen.