Wednesday, June 14, 2023

MRF surpasses the Rs. 1 lakh mark, up 600% in ten years, marking a first for an Indian stock

 When Sachin Tendulkar retired in 2013, a single stock of the company whose logo adorned his bat for over a decade would have been worth Rs 1 lakh today, up more than seven times. If you were a fan of Sachin Tendulkar, you would have bought it.

MRF, a Chennai-based manufacturer of tires, became the first stock to reach Rs 1 lakh on Tuesday, setting a new Dalal Street record. Its portions hit a 52-week intraday high of Rs 1,00,300 on Tuesday as the stock rose almost 2%, finishing the day at Rs 99,988 on the BSE.

For more than a decade, Tendulkar and other cricketers like Virat Kohli had endorsed the MRF brand. In mid-June of the year when Sachin Tendulkar resigned, the MRF stock was exchanging at around Rs 14,300. It is now worth Rs 1 lakh.

Is this what makes MRF the most valuable stock? The high-priced shares of MRF are key to not splitting stock. Not actually. Analysts stated that a high price tag does not necessarily indicate a company's stock's value or strength. They stated that market capitalization, the price-to-earnings (P/E) ratio, profit, and other business metrics must be considered.

For example, MRF, with a market cap of Rs 42,390 crore, doesn't highlight among the top organizations regarding valuation. With a market capitalization of more than Rs 17 lakh crore, RIL leads this list, followed by TCS with just under Rs 12 lakh crore. TCS shares closed at Rs 3,244 each on Tuesday, while Reliance stock closed at Rs 2,520.

In addition, how was the MRF stock able to scale this peak? While organizations frequently attempt stock parts or rewards to make their portions more available to retail financial backers, MRF has not done as such in anywhere close to 50 years. The high price of its shares was due to this.

According to an analyst, companies that intend to keep their institutional shareholding typically do not choose stock splits. Retail investor shareholding in MRF was 12.7% (up to Rs 2 lakh). A request for comments was made, but MRF did not respond.

According to Prime Database's MD, Pranav Haldea, "A high-priced share does not necessarily signify that a company is doing very well, just as a low-priced share does not necessarily mean the company is down in the dumps." Instead, investors should concentrate on the potential for future growth, whether they are investing in stocks or mutual funds," he added.

At Rs 23,008 crore, MRF's combined income for 2022-23 developed 19% year-on-year. Benefits developed 15% in a similar period to Rs 768 crore. Motilal Oswal Securities analysts stated that MRF's competitive position among industry peers is deteriorating.

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