MRF - MRF

📊 NSE: MRF 🏢 Tyres 📅 Last Updated: 12/14/2025 10:02

💰 Financial Performance

Revenue Growth by Segment

In FY25, the Original Equipment Manufacturer (OEM) segment grew 15%, Exports grew 22%, and the Replacement market grew 5%. For Q2 FY26, consolidated total income reached INR 7,487 Cr, a 7% increase from INR 6,994 Cr in Q2 FY25.

Geographic Revenue Split

Domestic sales contribute approximately 92% of revenue, while Exports account for 8% of the total revenue mix as of FY25.

Profitability Margins

Net profit margin for Q2 FY26 stood at 6.95%, up from 6.63% in Q2 FY25. Operating margin for Q2 FY26 was 8.92% compared to 8.37% in the same period last year, driven by softening raw material prices.

EBITDA Margin

PBILDT margin moderated to 14.58% in FY25 from 16.99% in FY24, a decline of 241 basis points primarily due to the escalation in natural rubber prices.

Capital Expenditure

MRF planned a capital expenditure of INR 3,200 Cr for FY24, primarily funded through internal accruals and existing cash balances to support capacity additions.

Credit Rating & Borrowing

CARE reaffirmed 'CARE AAA; Stable' for long-term facilities and 'CARE A1+' for short-term facilities. Interest coverage ratio (PBILDT/Interest) stood at a comfortable 11.17x in FY25.

⚙️ Operational Drivers

Raw Materials

Key raw materials include natural rubber and crude-linked derivatives. Rubber price volatility significantly impacts margins, as seen in the 241 bps PBILDT margin compression in FY25.

Capacity Expansion

The company has invested in capacity additions over the last two years, including a planned INR 3,200 Cr capex in FY24, to maintain its market leadership across various segments.

Raw Material Costs

Raw material costs are a primary driver of profitability; softening prices in Q2 FY26 led to an 11.7% YoY increase in net profit to INR 526 Cr.

Manufacturing Efficiency

Inventory turnover ratio was 5.13x (annualized) for the quarter ended September 30, 2025.

Logistics & Distribution

MRF utilizes a wide distribution network to support its 70% revenue share from the replacement market, though specific costs are not disclosed.

📈 Strategic Growth

Expected Growth Rate

Growth Strategy

Growth is driven by a multi-pronged strategy: expanding capacity through an INR 3,200 Cr capex, focusing on high-growth OEM segments like 2W/3W (20% growth) and Passenger Cars (29% growth), and maintaining a dominant 70% share in the margin-accretive replacement market.

Products & Services

Automotive tyres and tubes for Truck & Bus, 2-Wheeler, 3-Wheeler, Passenger Cars, and Small Commercial Vehicles (SCV/LCV).

Brand Portfolio

MRF

Market Expansion

MRF is expanding its global footprint in regions like the Philippines, Bangladesh, Nepal, and UAE; impact from USA reciprocal tariffs is expected to be negligible due to low export volume to that region.

Market Share & Ranking

MRF is the market leader in the domestic tyre industry in India with a pan-market presence.

🌍 External Factors

Industry Trends

The industry is seeing sizeable capacity additions by major players and a shift toward higher volume growth in the 2W/3W and Passenger Car OEM segments.

Competitive Landscape

MRF faces intense competition from other established domestic tyre manufacturers who have also been adding capacity recently.

Competitive Moat

MRF's moat is built on a strong brand image and an extensive distribution network that secures a 70% revenue share from the stable replacement market, making it difficult for competitors to displace.

Macro Economic Sensitivity

Revenues are susceptible to cyclicality in automotive demand, particularly in the commercial vehicle segment which is sensitive to GDP growth and infrastructure investments.

Consumer Behavior

There is a notable shift in consumer demand toward 2W and 3W vehicles in the OEM segment, where MRF saw an 18% volume increase in FY25.

Geopolitical Risks

A 50% reciprocal tariff on exports to the USA effective August 27, 2025, poses a trade barrier, though MRF's current exposure to the USA is negligible.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to government regulations, pollution norms, and trade policies such as the 50% reciprocal tariff on USA exports.

Environmental Compliance

The company acknowledges ESG risks related to emissions, waste generation, and water consumption inherent in tyre manufacturing, though specific compliance costs are not disclosed.

Taxation Policy Impact

The effective tax rate for Q2 FY26 was approximately 24.7%, with a tax provision of INR 173 Cr on a PBT of INR 699 Cr.

Legal Contingencies

The company notes that litigation and industrial relations are factors that could influence operations, but specific pending case values are not disclosed.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of natural rubber prices, which can cause significant margin fluctuations (e.g., 241 bps compression in FY25).