MRF Ltd. shares traded flat at ₹1,25,180 on Wednesday on the NSE and BSE, attempting to claw back from morning lows after surging commodity expenses clipped quarterly profitability.
The retreat was sharp. Net profit tumbled 28% year-on-year to ₹369 crore for the second quarter of FY27, down from ₹512 crore in the corresponding period last year. Yet top-line demand stayed resilient. Revenue climbed 18% to ₹8,524 crore compared with ₹7,250 crore a year earlier, confirming sustained volume traction across passenger and commercial vehicle lines.
Operating spreads absorbed the bulk of the damage. Operating EBITDA margin shrank to 10.7% from 15% in the year-ago period—a steep contraction of 430 basis points.
Sequentially, margins compressed 73 basis points. A 95-basis-point drop in gross margin led the slide, sparked by an 8% to 9% quarter-on-quarter spike in the blended raw material basket. Input inflation outpaced immediate operational adjustments.
Tyre manufacturers moved early to counter input pressures. Across the replacement market, producers pushed through price increases between 13% and 15% during the first half of FY27, while aggressive plant-level cost controls cushioned balance sheets from deeper margin erosion.
| Financial Metric | Q2 FY27 | Q2 FY26 | YoY Change | QoQ Change |
|---|---|---|---|---|
| Revenue | ₹8,524 crore | ₹7,250 crore | +18% | — |
| Net Profit | ₹369 crore | ₹512 crore | -28% | — |
| EBITDA Margin | 10.7% | 15.0% | -430 bps | -73 bps |
| Gross Margin | — | — | — | -95 bps |
Relief will not arrive immediately.
While replacement channels absorb price hikes swiftly, agreements with original equipment manufacturers carry a one-quarter pricing lag. The full benefit of wholesale price revisions negotiated in Q2 FY27 will only surface on the ledger in Q3 FY27, leaving near-term gross margins under pressure.
Investment bank CLSA maintained its "outperform" call on MRF with a target price of ₹1,65,238—representing a 32% upside potential from current levels.
Operating costs will remain elevated through the third quarter. But CLSA models an operational turnaround starting in FY28, underpinned by cooling commodity baskets following recent crude oil slides, combined with the full absorption of compounding price hikes across dealer networks.
Market Context: Tyre makers face a structural timing gap between spot commodity cost surges and contract resets with vehicle manufacturers, turning multi-quarter margins into a function of inventory cycles and pricing power.
The broader market remains unconvinced.
MRF stock has shed 17% so far this year, reflecting lingering institutional hesitance over cost stickiness. Across 11 brokerage analysts tracking the counter, consensus remains fragmented: four hold a "buy" rating, two suggest "hold", and five recommend "sell". The blended analyst target implies an 8% gain from current trading marks.
Traders and institutional desks now await third-quarter volume printouts and input pricing trajectory to judge whether cooling oil benchmarks can counter elevated production bills before fiscal year-end.
| Raw Material Basket |
| — |
| — |
| — |
| +8% to +9% |