SRF Ltd. share price target

SRF's 4QFY21 operating performance was robust on the back of margin expansion across segments (on a YoY basis). On a QoQ basis, EBIT margins have further moderated (-420bp QoQ) in the Packaging segment. SRF's performance over the last three years has been robust, with an earnings CAGR of 42% and stock price CAGR of ~34%. On the other hand, we expect the earnings momentum to slow to a 21% CAGR over FY2123, primarily due to a) margin contraction in the Packaging...

SRF maintained its strong run-rate during Q3FY21, posting results in line with our estimates.

EBITDA, consequently saw a strong growth of 73.6% YoY to Rs 5.82bn (D.est: Rs 4.17bn) led by gross margin expansion and low Opex (up 1.4% YoY to Rs 2.23bn). Power and Fuel/Employee costs were at a...

SRF Limited (SRF) posted robust Q2FY2021 result with better-than-expected revenue growth of 21% y-o-y (versus our estimate of 6%) to Rs. 2,101 core and sharp 641 bps beat in EBITDA margin at 28.2% (expectation of 21.8%). Chemical/packaging film business reported higher-than-expected revenue growth of 30%/26% y-o-y to Rs. 881 crore/Rs833 crore. Packaging EBIT margin was up 995 bps y-o-y to 29.6% and chemical EBIT margin stood at 19.8% (up 50 bps y-o-y; 724 bps q-o-q). The company is upbeat on strong growth in the specialty chemical business and has guided for...

3 September 2020 Over FY11-20, SRFs cumulative capex stood at INR84b with the company delivering revenue of 11% CAGR to INR72b. Of the total capex incurred over the last 10 years, 57% has been deployed toward Chemicals, resulting in 16% revenue CAGR to INR29.8b. Over the last 10 years, incremental revenue/EBITDA stood at INR47.1b/INR8.4b while the company incurred capex of INR56.4b over FY11- 18 (assuming lag effect of 2 years due to monetization i.e. capex of 8 years is considered for calculating ratios). Thus, translating into incremental revenue/EBITDA to capex of 0.83x/0.15x. Over the last 5 years, SRF has incurred capex of INR53b constituting 63% of the capex incurred over the last decade. Thus, capex intensity has increased in the last 5 years. Average asset turnover/fixed asset turnover for the last 10 years stood at 0.

However, the COVID-19 pandemic and Auto sector slowdown impacted Technical Textiles and Refrigerant segments. Factoring in the estimate beat, we have increased FY21/FY22E earnings by 1QFY21 revenue declined 12% YoY to INR15.5b (v/s est. Significant impact in white goods and automobile revenue declined 3% YoY to INR6.8b with margin expansion of 11.8pp YoY to 32.6% (EBIT grew 52% YoY). Margin expansion was due to higher spreads, led by supply-demand mismatch and higher share of value- added products, resulting in higher value realizations across revenue plunged 63% YoY to INR1.4b due to significant slowdown in demand from tyre majors. SRF already has 95kMT capacity, which is Performance in 1QFY21 was impacted due to the COVID-19 pandemic and auto slowdown. While sluggishness in autos dented performance of the Technical Textiles business, the slowdown in white goods/auto impacted the Refrigerants However, strong margin expansion was witnessed in Packaging Film segment due to demand-supply mismatch and higher share of value-added products.

SRF Ltd reported a topline de-growth of ~8% YoY to `18,578mn on the back of drop in its segments such as technical textiles and packaging solutions which declined 34% & 3% YoY in Q4FY20. Packaging solutions segment reported drop in revenues due to lower product prices whereas technical textiles revenues declined amid persisting weakness in the automobiles segment in Q4FY20. In FY20, topline grew to `72,094mn on the back of robust volume led growth in agrochemical revenues however partly offset by decline in technical textiles, weakness in refrigerants and slowdown in automobile sector. EBITDA grew by 1.2% to `3884mn on account of lower operating expenditure while...

SRF's Q4FY20 earnings continued to reflect strong demand in its specialty chemicals business (SCB).

4QFY20 performance of SRF was impacted due to the COVID-19 pandemic and the auto sector slowdown, which in turn impacted the Technical Textiles and Refrigerant segments. However, strong margin expansion in the Packaging segment led to 4% EBITDA growth despite revenue decline of 4%. The segments performance was impacted by COVID-19, otherwise it has been consistently reporting >25% revenue growth since 1QFY19. Additionally, fluorochemicals performance was impacted by the auto slowdown and drop in global prices of revenues declined 3% YoY to INR6b with margin expansion of 480bp YoY to 21.7% (EBIT grew 24% YoY). Performance in 4QFY20 was impacted due to the COVID-19 pandemic and the auto slowdown. Capex of INR8b for FY21 (excluding BOPP and resin plant in Thailand and BOPET Performance in 4QFY20 was impacted due to the COVID-19 pandemic and the auto slowdown.

Gross margins expanded by 580bps YoY on account of benign RM costs, sequentially improving by 102 bps to 50.6%. EBITDA margins at 20.9% could have been better (COVID-19 impact caused deferment in sales),...