Neutral SRF; target of Rs 2080: Motilal Oswal

Motilal Oswal recommended Neutral rating on SRF with a target price of Rs 2080 in its research report dated October 23, 2024.

Broker Research

October 24, 2024 / 19:37 IST

Neutral

Motilal Oswal's research report on SRF

SRF posted weak performance in 2QFY25, with a material decline in operating profitability (EBIT down 22% YoY), due to the continuous weakness in the Chemicals business (EBIT dipped 29% YoY). The Technical Textiles business also witnessed subdued performance (EBIT down 5% YoY), which was offset by a relatively healthier performance in the Packaging Film business (EBIT grew 7% YoY). The overall macro scenario remains uncertain for the Chemicals business (74% EBIT mix in FY24); however, the management is expecting some recovery in 3Q which is likely to further accelerate in 4QFY25, led by a healthy order book in specialty chemicals and ramp-up of export/domestic volumes in the Fluorochemicals business. Factoring in the weak macro scenario and uncertain near-term outlook in the Chemicals business, we cut our FY25/FY26 EBITDA estimates by 13%/7%. We value the stock on an SoTP basis to arrive at our TP of INR2,080. Reiterate Neutral.

Outlook

Factoring in the weak macro scenario and uncertain near-term outlook in the chemicals business, we cut our FY25/FY26 EBITDA estimates by 13%/7%. We value the stock on an SoTP-basis to arrive at our TP of INR2,080. Reiterate Neutral.

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