MRF shares fall after heavy raw material costs push Q2 profit down. Why Motilal Oswal screams Sell

Shares of MRF edged lower on Wednesday after the tyre-maker reported a nearly 27% year-on-year (YoY) drop in consolidated net profit from continuing operations to Rs 387 crore for the July-September quarter of the ongoing FY27, from Rs 527 crore reported in the same period last year, as higher raw material costs offset double-digit revenue growth.

MRF shares fell nearly 1% to Rs 1.24 lakh per share on Wednesday morning. The company’s revenue from operations, meanwhile, increased over 17% YoY to Rs 8,660 crore during the second quarter of FY27, from Rs 7,379 crore reported in the corresponding quarter of the previous financial year. Its total expenses grew 22% YoY to Rs 8,270 crore during Q2 FY27, from Rs 6,788 crore in Q2 FY26. The cost of materials jumped more than 43% to Rs 6,553 crore from Rs 4,577 crore.

"The company delivered strong double-digit sales growth in the second quarter. We were able to capitalise on sustained demand for the company's products from both OE and replacement segments," MRF said in a press release. It noted that the sharp rise in raw material prices amid global uncertainties adversely affected profitability during the quarter, but price increases and cost-saving measures helped mitigate the pressure.

The company expects continued disruptions and volatility in commodity markets, with raw material and logistics costs likely to remain elevated. "We will continue to take measured steps to address these challenges," it added.

Also read | MRF Q2 Results

MRF dividend

MRF on Tuesday announced an interim dividend of Rs 3 per share, rewarding investors in India's most expensive stock. In an exchange filing, the company said its board of directors declared the interim dividend of Rs 3 per share with a face value of Rs 10 each for the ongoing financial year 2027.

MRF has fixed November 17 as the record date to determine the eligibility of shareholders set to receive its dividend. This means that only those shareholders who own the stock in their portfolios as of November 17 (Tuesday) will be eligible to receive the dividend. The interim dividend declared will be paid on or after December 1 this year.

MRF has declared 81 dividends since August 2, 2000, and the stock has a dividend yield of 0.19%, according to data on Trendlyne. Prior to this, it paid a final dividend of Rs 229 per share for FY26 in July last year. Before that, it paid two interim dividends of Rs 3 each in February 2026 and November 2025, following a final dividend of Rs 229 apiece.

Also read | Dividend alert! MRF announces Rs 3/share interim dividend. Check record date

What lies ahead for MRF shares?

Motilal Oswal maintained its ‘Sell’ rating on the shares of MRF with a target price of Rs 1.05 lakh per share, implying 16% downside potential. The domestic brokerage said the company’s PAT missed estimate while higher-than-expected raw material inflation led to a 430bp YoY contraction in EBITDA margin to 10.7%

“Management remains cautious about the demand outlook given the risk of a subnormal monsoon. Further, rising raw material costs and supply chain disruptions due to the ongoing Middle East conflict remain the key nearterm headwinds. As a result, we cut our FY27 earnings estimate by 17% and now expect MRF’s earnings to remain flat over FY26-28,” it said.

MRF share price

MRF shares gained more than 6% in a week and over 2% in a month, but are down 18% in 2026 so far and 21% in one year to close at Rs 1.25 lakh per share. In the longer term, the shares of the company have delivered positive returns of more than 15% in three years and 60% in five years.

The company has a market capitalisation of nearly Rs 52,059 crore.

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.