UBS Securities downgrades SRF to 'sell', warns of potential negative surprises; stock falls 2%

SRF's shares have remained largely unchanged in the past three years, delivering just 4 percent returns.

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26 Aug, 2025 12:21

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Brokerage firm UBS Securities has taken a bearish turn on SRF as it downgraded the stock to a 'sell' from its previous 'buy' call. Not stopping there, the brokerage also slashed its price target for the chemical maker by over 22 percent to Rs 2,100 which forecasts a potential downside of 9 percent from the previous closing levels.

Shares of SRF also fell 2 percent following the downgrade and at 11.38 am, were trading at Rs 2,261.75 on the NSE.

The downgrade stems from SRF's persistent growth challenges, sluggish agrochemical demand (with China expected to capture more market share), and softness in demand and pricing for refrigerant gases. UBS Securities highlighted these issues and flagged the potential for negative surprises from SRF in the near future.

"The US refrigerant gas market, where SRF is a key exporter, is grappling with weak demand due to high channel filling last year ahead of quota implementation, while Chinese manufacturers are gaining share by subsidising export prices thanks to strong domestic profitability," the brokerage noted.

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UBS has also slashed its earnings per share (EPS) estimates for FY25 and FY26 by 20 percent and 22 percent, respectively. At UBS's price target, SRF would be valued near its five-year average price-to-earnings ratio based on FY26 estimated EPS, a significant drop from the current 20 percent premium.

The company has faced weak earnings over the past few years, impacted by a surge in low-cost inventories from China and declining prices. Similarly, SRF's shares have remained largely unchanged, delivering just 4 percent returns over the last three years.

UBS Securities further noted that after prolonged financial struggles, hopes for a recovery in SRF are diminishing.

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