Buy SRF; target of Rs 356: Firstcall Research

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Buy SRF; target of Rs 356: Firstcall Research

Firstcall Research is bullish on SRF and has recommended buy rating on the stock with a target of Rs 356 in its September 21, 2011 research report.

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Firstcall Research is bullish on SRF and has recommended buy rating on the stock with a target of Rs 356 in its September 21, 2011 research report.

"The multi-business corporate group SRF with head quarters in Gurgaon, India has over the years expanded its footprints beyond the national boundaries. Today it enjoys the status of a global entity with operations in four countries; eight manufacturing plant locations in India and one each in UAE, Thailand and South Africa. The market leader in most of its businesses in its home market in India, SRF is the world's 2nd largest manufacturer of both the Nylon 6 tyre cord as well as the belting fabrics. SRF strives to ensure faster integration of people, procedures and practices across global entities to build synergies and create value for its stakeholders. Building on its in-house R&D facilities for Technical Textiles Business and Chemicals Business, the company strives to stay ahead in business through innovations in operations and product development."

"SRF LTD disclosed results for the quarter ended June 2011. Net sales for the quarter moved up 36% to Rs.8388.00 million as compared to Rs.6189.80 million during the corresponding quarter last year. During the quarter, the company has reported Net Profit increased to Rs.828.10 million from Rs.547.80 million in previous year same quarter. The Basic EPS of the company stood at Rs.13.80 for the quarter ended June 2011."

"Net profit of the company has increased at 56% yoy Rs.4834.40mn from Rs.3094.20mn of same period of last year. Total revenue for the year stood at Rs.30632.80mn from Rs.21938.50 which is 40% increased than that of a year ago. EPS for the year stood at Rs.79.91 per equity share of Rs.10.00 each. Operating profit of the company stood at Rs.9131.10mn. OPM for the year stood at 29.81%. Expenditure of the company increased 40% YoY to Rs.21649.60 mn. Interest expenses for the year stood at Rs.839.20mn.  At the current market price of Rs.315.00, the stock is trading at 3.46 x FY12E and 3.00 x FY13E respectively. Price to Book Value of the stock is expected to be at 0.89 x and 0.69 x respectively for FY12E and FY13E. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.90.91 and Rs.104.97 respectively. SRF is world second largest producer of Nylon 6 tyre cord fabrics and belting fabrics. The company exports its products to over 60 countries. SRF Ltd has Investment in a thin BOPET film line (28500 TPA) and metalizer (7050 TPA) in Thailand as a cost of USD 65 million equivalent to Rs. 290 crores (appx); The plan to set up 28500 MT BOPET Film plant in Bangladesh through a 80:20 joint venture with Nitol Niloy Group. Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 27% over 2010 to 2013E respectively."

"During the quarter, the company has reported Net Profit increased to Rs.828.10 million from Rs.547.80 million in previous year same quarter. On the basis of EV/EBITDA, the stock trades at 1.89 x for FY12E and 1.66 x for FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend 'BUY' in this particular scrip with a target price of Rs 356 for medium to long term investment," says Firstcall Research report.

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To read the full report click on the attachment