SRF Ltd. share price target

SRF’s fluorochemicals division shows strong demand with firm pricing. The company is investing Rs. 1,100 crore in less-polluting HFO (fourth generation) for FY28 launch.

Capex for FY26 to be Rs17-19bn, rise to Rs27-30bn for FY27 We recently met with the management of SRF Limited, to understand its business prospects and get an update on key ongoing projects. The management continues to remain positive on its refrigerants business and expects R-32 realization to rise further in the near term. With a capex of Rs11bn, the 4th generation refrigerants plant is expected to come online by 2027. SRF also targets to gain 40% market share in 6-7 AIs with TAM of $1.2bn. The...

We re-iterate BUY on SRF with revised SoTP-based TP of Rs3,250 (rollover to Mar-27E; up by 4.8%), as we believe the worst is behind for all businesses of SRF and, going forward, we should see gradual pick up in specialty chemicals driven by stabilization of existing products and incremental contribution from newer products (largely Active Ingredients).

Recovery seen the chemicals business

We upgrade SRF to BUY from Add and raise our SoTP-based TP by over 19% to Rs3,100, as we believe i) the worst is behind for all of its businesses, ii) SRF is seeing gradual uptick in its specialty chemical business from existing products, and healthy contribution is expected from new AIs in FY26

SRF posted a decent overall performance in 3QFY25. However, the Chemicals business and the Packaging Films business displayed material improvement during the quarter.

SRF’s chemicals business is facing multiple headwinds from increased Chinese competition, weak demand from agro-chemical innovators, delay in new product commercialisation and drop in prices.

In Q2FY2025, revenue reached Rs. 3,424 crore, up 8% y-o-y, but down 1% q-o-q. Operating profit stood at Rs. 538 crore, reflecting a 14% y-o-y decrease and an 11% q-o-q decline.

SRF posted weak performance in 2QFY25, with a material decline in operating profitability (EBIT down 22% YoY), due to the continuous weakness in the Chemicals business (EBIT dipped 29% YoY).

Q1FY25 revenues rose 4% y-o-y to Rs. 3,464 crore, but fell 3% q-o-q. Operating profit totaled Rs. 603
crore, falling 13% both y-o-y and q-o-q.

SRF posted muted 1QFY25, with a material decline in operating profitability (EBIT down 20% YoY), due to the continuing weakness in the Chemical businesses.

SRF witnessed a challenging year (revenue/EBITDA down ~12%/27% YoY), with multiple headwinds plaguing its business segments. The chemicals and packaging businesses inhibited SRF’s overall performance, while the technical textiles business remained flat. Due to this, the capex intensity also waned in FY24.

SRF reported another subdued operating performance in 4QFY24 with a
significant decline in operating profitability (EBIT down 34% YoY), due to the
continuing weakness in the Chemical/Packaging Film businesses (EBIT dipped
33%/19% YoY), which offset the strong performance in the Technical Textile
business (EBIT jumped 44% YoY).

Revenue for the quarter of Rs. 3570 crore was down 7% y-o-y and up 17% q-o-q. Chemical/ Technical textiles/packaging films segments grew 30%/8%/2% q-o-q and -14%/2%/9% y-o-y. Growth was affected due to the weak external environment in specialty chemicals and fluorochemicals.