Buy SRF; target of Rs 3540: Motilal Oswal

BUY

Motilal Oswal's research report on SRF

SRF posted a decent overall performance in 3QFY25. However, the Chemicals business and the Packaging Films business displayed material improvement during the quarter. Margins for the Chemicals business improved 120bp/ 620bp YoY/QoQ, while the same for the Packaging Films business improved 240bp/70bp YoY/QoQ. The overall macro scenario is showing some signs of revival for the Chemicals business (67% EBIT mix in FY25E), coupled with management’s expectation of strong sequential growth in 4QFY25 with further improvement from FY26. This will be led by a healthy launch pipeline and demand recovery in specialty chemicals, a ramp-up of exports/domestic volumes in the Fluorochemicals business and pricing improvement in the overall chemicals business.

Outlook

We upgrade SRF to BUY from Neutral, valuing the stock on an SoTP basis to arrive at our TP of INR3,540.

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