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MRF: The First Stock to Hit Rs 1 Lakh Mark on Dalal Street
In a significant milestone for Dalal Street, MRF, the renowned tyre manufacturer, has become the first stock to surpass the Rs 1 lakh mark. With a surge of 1.37%, MRF shares reached a new 52-week high of Rs 100,300 on the BSE. This achievement showcases the company's strong performance and investor confidence in its growth prospects. While MRF's stock price is now at a record high, it is essential to note that the price alone does not determine the stock's value. To assess a stock's attractiveness, investors consider other critical metrics like price-to-earnings (PE) and price-to-book value (PE) ratios.
MRF’s Remarkable Journey
MRF’s journey to the Rs 1 lakh milestone has been notable. In May, the stock came close to reaching the Rs 100,000 mark in the spot market, falling short by just Rs 66.50. However, it successfully crossed this psychologically significant level in the futures market on May 8. This achievement further solidified MRF’s position as a market leader and garnered attention from investors and industry experts.
India’s Highest-Priced Stocks
When it comes to high-priced stocks in India, MRF takes the lead. With shares priced at Rs 41,152, Honeywell Automation comes second on the list. Other notable stocks with significant price tags include Page Industries, Shree Cement, 3M India, Abbott India, Nestle, and Bosch. While MRF holds the highest price tag, it is crucial to recognize that stock valuation goes beyond the price alone. Factors such as PE and price-to-book value ratios are vital in assessing a stock’s value.
The Significance of Valuation Metrics
To understand a stock’s valuation comprehensively, investors analyze metrics like the price-to-earnings ratio (PE) and price-to-book value ratio (PE). These metrics help evaluate whether a stock is overvalued or undervalued compared to its financial performance. MRF’s trailing 12-month PE ratio is 55.2 times earnings, indicating a premium valuation. Educating retail investors about the distinction between a stock’s price and its accurate valuation is essential, as misconceptions can lead to inaccurate perceptions of a stock’s value.
MRF’s Unchanged Stock Structure
While a stock split can reduce the price per share, MRF has never undergone such a process. The Chennai-based company has 42,41,143 shares, of which 30,60,312 are owned by public shareholders, accounting for 72.16% of the total equity. The remaining 27.84% of the equity is held by promoters, amounting to 11,80,831 shares. Despite MRF’s high ticket price, it is essential to consider other factors beyond price when evaluating a stock’s attractiveness.
Retail Investor Perception
The high ticket price of MRF shares often deters retail investors from investing in the stock. As of the end of the March quarter, retail shareholding in MRF, defined by investments of less than Rs 2 lakh, accounted for 12.73% of the total shares. Approximately 40,000 small investors own MRF shares. Educating retail investors about the correlation between stock price and valuation can empower them to make informed investment decisions.
MRF’s Recent Performance and Future Outlook
Over the past three months, MRF’s stock has demonstrated remarkable growth, rallying over 20%. With a market capitalization of approximately Rs 42,500 crore, the company has positioned itself as a robust player in the market. It is important to note that expert opinions on MRF’s stock performance differ. Out of the seven analysts covering MRF, five have given sell ratings. Analysts from Motilal Oswal and Kotak Institutional Equities previously set price targets of Rs 75,400 and Rs 66,000, respectively. In contrast, brokerage firm Anand Rathi recommends a ‘hold’ on MRF with a target of Rs 96,000. The diverse range of opinions highlights the complexity of stock analysis and the importance of conducting thorough research before making investment decisions.
