MRF shares fell to a day’s low of Rs 1,29,570 after the tyre major’s June quarter EBITDA margin slipped to 11.77% from 13.95% a year ago.

The stock came under pressure on Tuesday even though the company’s headline revenue number looked healthy. What dragged the shares down was weakness on the profitability side, not the sales line.

Let’s look at what actually happened. Revenue from operations grew a solid 9.6% to Rs 8,415.5 crore in the June quarter, up from Rs 7,675.6 crore in the same period last year.

But that growth in sales didn’t translate into stronger earnings. EBITDA actually fell 7.5% to Rs 990.6 crore from Rs 1,070.4 crore a year earlier, and the operating margin contracted meaningfully.

The cost of materials consumed jumped sharply to Rs 5,824 crore from Rs 4,597 crore in the year ago quarter, eating into what the company earns from each tyre it sells.

Other expenses also rose, climbing to Rs 1,275 crore from Rs 1,097 crore. Finance costs were one of the few line items that actually came down during the quarter.

On the bottom line, consolidated net profit stood at Rs 495.35 crore for the quarter, roughly flat compared to Rs 501.82 crore in the same quarter last year, and lower than the Rs 702.25 crore the company posted in the previous quarter.

The board has not declared any dividend along with these results. MRF has had a tough run this year overall.

The stock is down around 14% year to date, reflecting the pressure input costs have put on margins across the tyre industry.

As of 13:27 pm, MRF was trading at Rs 1,31,120 on the NSE, down 2.04% for the day.

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