Buy SRF; target of Rs 2168: Edelweiss

Edelweiss' research report onSRF

SRF’s Q4FY18 operational results were broadly in line with our estimates. However, the PAT miss (by 22%) was due to the sharp jump in interest and depreciation owing to commissioning of the new packaging film unit. Management commentary on further delays in pick up in speciality chemicals business (now expected in H2FY19 vs. FY19 earlier) continues to exert pressure on the stock.

Outlook

We believe that SRF’s leadership position in refrigerant gas and significant capex in specialty chemicals will drive its return ratios going ahead. Other segments like technical textiles and packaging film business continue to generate strong cash flows and we reiterate ‘BUY’ with our SoTP-based target price of INR2.168.

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