Crude price going up will negatively impact not Indian Economy but also industries and sectors associated with crude prices. The Tyre Sector is one of those sectors that will react negatively due to rising crude prices. The crude oil derivative used in the manufacturing of tyres constitutes around 30 per cent of the total raw material cost. This will impact the margins of Tyre companies. However, Anand Rathi says that they are Bullish on MRF and highlights key reasons for their belief.

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Anand Rathi continues to be positive with regard to the outlook for MRF across segments. Anand Rathi expects the demand momentum to continue as they are experiencing unlocking of lockdowns starting today in the South and in some parts of the country. Anand Rathi expects Q2 FY22 demand to grow strongly with expected normal operations at MRF. Anand Rathi expects revenue to grow 25% yoy in FY22. Anand Rathi continues to be positive on MRF, with a Buy rating at a target price of Rs 96217.

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Anand Rathi expects OEMs and replacements to grow strong in FY22. While we saw 31% y/y (4% q/q) growth in Q4 FY21 to Rs 47.3 bn, Anand Rathi expects growth to be strong in FY22. Anand Rathi believes that production constraints have been addressed and plants have started running from mid-May’21. Hence, Anand Rathi is of the view that demands for tyres will be addressed. Accordingly, Anand Rathi expects strong, 25%, growth in FY22, and 12% in FY23

Channel checks indicate that MRF has raised prices in Mar, Apr, and May, by 1-2% cumulatively. Also, Anand Rathi understands that supply issues with regard to rubber availability have eased for MRF. Therefore Anand Rathi believes that production will continue unhindered. Channel checks also indicate that demand for tyres across segments remains strong; therefore Anand Rathi expects strong overall growth, led by the replacement category.

MRF’s origin traces back to the humble shack in Madras that housed its first makeshift toy balloon manufacturing unit set up by KM Mammen Mappillai in 1946. It was not until 1952 when it changed course and turned to tread rubber manufacturing. Thus began its glorious reign as the undisputed leader in the tread rubber industry. MRF’s passion for motorsports is seen through its involvement in racing, karting, rallying and various other motorsport events. Its rallying team has won the prestigious FIA Asia Pacific Rally Championship twice and even in international championships, MRF karting tyres homologated by FIA, is the preferred choice.