Chemicals & Petrochemicals share price target

1) SRF: R-22 price rose to Rs346/kg (+3.4% QoQ) in Q4FY23-TD; volumes were up 179.5% YoY to 0.91kte. In packaging films segment, spreads contracted QoQ for both BOPET and BOPP, which will put pressure on SRF’s packaging films margin.

This week marks one year of the Ukraine war, with millions of displaced people, and massive economic losses. The sound of Russian tanks rolling into Ukraine was heard across the globe, driving energy prices up, and upending supply chains.

1) SRF: R-22 price rose to Rs335/kg (+12.0% QoQ) in Q3FY23, but volumes were down 15.3% YoY to 2.6kte. In packaging films segment, spreads contracted QoQ for both BOPET and BOPP, which has put pressure on SRF’s packaging films margin.

In Q3, we anticipate decent revenue growth for the companies under our coverage in the speciality chemicals sector, driven by improvement in realisations, and recovery in volume. We expect moderate volume growth with better price realisation on account of pass through of increased input costs. In the last couple of quarters, the industry faced multiple headwinds such as supply constraints, rising input costs, large channel inventories, and higher freight costs.

1) SRF: R-22 price rose to Rs331/kg (+10.7% QoQ) in Q3FY23-TD, but volumes were down 30.4% YoY to 1.6kte. In packaging films segment, spreads contracted QoQ for both BOPET and BOPP, which should incrementally put pressure on SRF’s packaging films margin.

We estimate our specialty chemical coverage universe’s revenue to grow 12.2% YoY (down 1% QoQ) in Q3FY23. EBITDA to grow 1.1% YoY (5.1% QoQ), however, excluding Chemplast, 15.9% YoY - 1) SRF’s EBITDA to dip (-7.3%) YoY on lower margin in non-chemicals, while chemicals business to continue its good show.