The top leading tyre stocks on the Indian market are CEAT Ltd and MRF. The two have roped in an elite list of sports players as brand ambassadors. Want to take a wild guess, of who are among the endorsers of CEAT and MRF? Well, your guess is right! It's one of the greatest batsmen of the Indian cricket team aka Rohit Sharma. With the 2024 ICC Men's T20 World Cup going in full swing, as an investor, there is an opportunity to score a win in the stock market as well. But which stock to buy, CEAT or MRF?
The T20 Men's Cricket World Cup has started from June 1 and will continue till June 29, 2024. This is the first major ICC event tournament which features matches played in the United States and any other country in the Americas outside the West Indies. India is participating as well with Sharma being the current captain of the team, alongside the history-breaker and former captain Kohli. Both are in their full forms in the competition. Are the stocks that they endorse in full forms too?
CEAT Ltd Share Price:
Sharma is among the key ambassadors of CEAT products with a recent feather to the list being female cricketer Shafali Verma.
On BSE, CEAT Ltd's share price ended at Rs 2526.90 apiece up by 2.91% on June 10 with a market cap of Rs 10,221.33 crore. CEAT has witnessed a fair share of consolidation, making it an attractive bet as its fundamentals are hinting towards a potential upside.
YTD, the stock zoomed by 3.72% on BSE. In a year, the stock has rallied by 26.15%. In 5-years, the stock surged by 173.5%.
CEAT has not carried any stock split and bonus issues but holds a strong track record of dividend payout. The latest payout will be of Rs 30 per share or 300% for which the record date will be announced soon for FY24.
Founded in 1924, CEAT is one of India's leading tyre brands and the flagship company of the RPG GROUP. Apart from this, CEAT is also a manufacturer of premium range bats for the sports field.
At the latest, JM Financial has recommended BUY on CEAT. In its research note dated June 9, 2024, JM said, "We recently attended CEAT's Investor Day to understand the company's medium-term growth strategy. Over the next 2 years, the company aims to gain a leadership position in the PV replacement segment (currently it is the No.3 player with 16% mkt. share) and targets c.400bps market share expansion in the T&B replacement market. The medium-term focus is on growing OHT/ exports and entering new export markets (incl. US). Near-term demand remains strong led by healthy replacement segment."
Further, JM's note added, " Industry has witnessed good pricing discipline in the recent past. Given the RM basket has once again started to increase, we see this pricing discipline to continue. A bite-size capex strategy is expected to maintain/drive ROCE. We maintain BUY with an unchanged Mar'25 TP of INR 3,200 (15x FY26e EPS). The ability to mitigate inflationary pressure through price hikes remains a key monitorable."
MRF Share Price:
Kohli who holds record-breaking titles such as highest run-scorer in IPL, ranks second in T20I, third in ODI, and stands as the fourth-highest in international cricket, surely is a brand ambassador of India's most expensive stock, MRF.
With a decades-old history, MRF is the largest manufacturer of tyres in India. MRF is the maker of rubber products including tyres, treads, tube conveyor belts, paints and toys. The company has sponsored key notable cricketers for decades such as Sachin Tendulkar, Brian Lara, Steve Waugh, Gautam Gambhir, and even Rohit Sharma. Currently, Jerome China and Virat Kohli are endorsed by MRF.
On BSE, MRF's share price is at Rs 1,26,958.55, with a market cap of Rs 53,844.94 crore. The stock's 52-week high and low are at Rs 151,283.40 and Rs 97,300 apiece respectively.
And just like CEAT, MRF has also not carried any stock splits and bonus issues. But has a robust track record of dividend payout. As per Trendlyne data, the stock has delivered up to 73 dividends since August 2000.
For FY24, the company has recommended a final dividend of Rs 1941 - (1940%) per share of Rs.10 each. The Company has already declared and paid two interim dividends of Rs.31- (30%) each per share for the financial year ended 3pt March, 2024. The total dividend for the financial year ended 3pt March 2024 works out to Rs. 200 (2000%) per share of Rs.10 each.
However, since MRF is so expensive and overvalued, it is mostly advised to sell. As per Trendlyne data, the recommendation from 9 analysts for MRF Ltd. is STRONG SELL. EPS is expected to reduce by 7.8% in FY25. The 1-year target price in MRF is at Rs 107,553, hinting at a 15% downside.
Meanwhile, Motilal Oswal also suggests selling. Recently, in its report, Motilal said, "MRF's competitive positioning in the sector has weakened over the past few years, which reflects in the dilution of pricing power in the PCR and TBR segments. This, coupled with the impact of the planned capex, should limit the expansion in return ratios. We expect MRF's return ratios to dilute over the next two years as its RoE is expected to decline to 11.2% by FY26E (vs. ~13.5% in FY24)."
It added lastly, "The stock is currently trading at 25x FY26E EPS, above its 10-year LPA, despite its weakening competitive position and similar capital efficiency as peers. Hence, we maintain our Sell rating on the stock with a TP of INR92,000 (valuing at 18x Mar-26E EPS)."
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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