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Indian tyre maker MRF reported better-than-expected second-quarter profit on Friday, as stronger replacement demand from retail customers outpaced muted sales to carmakers.

The company's consolidated net profit fell 20.4% to 4.55 billion rupees (nearly $54 million) for the quarter ended Sept. 30, but it beat analysts' average estimate of 4.25 billion rupees, according to data compiled by LSEG.

KEY CONTEXT

Indian tyre makers have seen their quarterly profits decline between July and September, hurt by weak demand from car, trucks and bus makers, often their biggest revenue source.

However, replacement demand - where customers replace older vehicle parts with newer ones - remained steady during the reported quarter.

This helped outpace weak demand from carmakers, whose sales to dealers fell for the first time in 10 quarters as demand cooled due to heavier-than-usual rains, while large trucks and buses sales dropped 12% in the reported period.

Also, the pre-festive season period, an inauspicious time for big-ticket purchases, fell entirely in September this year versus October in 2023.

Analysts also estimate domestic rubber prices jumped 20%, eating into the tyre makers' margins.

PEER COMPARISON

Valuation (next Estimates (next 12 Analysts' sentiment

12 months) months)

RIC PE EV/EBITDA Revenue Profit Mean # of Stock to Div

growth (%) growth(%) rating* analyst price yield

s target** (%)

MRF 23.54 11.46 9.25 6.79 Sell 4 1.07 0.16

CEAT 16.01 7.67 10.25 14.03 Buy 15 0.88 1.08

JK Tyre & 11.50 7.15 6.33 10.64 Buy 5 0.75 1.15

Industries

Apollo Tyres 17.56 7.65 8.42 16.38 Buy 23 0.91 1.22

* Mean of analysts' ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell

** Ratio of the stock's last close to analysts' mean price target; a ratio above 1 means the stock is trading above the PT

JULY TO SEPTEMBER STOCK PERFORMANCE

-- All data from LSEG

-- $1 = 84.3690 Indian rupees