Buy SRF; target of Rs 2745: Sharekhan

Sharekhan is bullish on SRF has recommended buy rating on the stock with a target price of Rs 2745 in its research report dated September 14, 2023.

Broker Research

September 17, 2023 / 16:20 IST

Buy

Sharekhan's research report on SRF

Bayer (SRF’s key customer) has recently hinted toward some easing of channel inventory in the agrochem space and provided a healthy growth outlook of 5-7% for its core CPC (ex-Glyphosate) portfolio. This bodes well for SRF’s fluorospecialty growth in the coming quarters. The upcoming 30% HFCs production cut in the U.S. from January 2024 would mean tight HFC market and the U.S. is likely to remain net importer of HFCs. This situation would play out well for SRF as it would have twin benefit of volume and better ref-gas pricing environment in H2FY2024. SRF’s massive capex plan of Rs. 15,000 crore for the next five years with majority focused on the chemical business would drive sustained high double-digit growth for its chemical business. The ramp-up of the new pharma intermediates plant, MPP-4, chloromethane and commissioning of new plants (PTFE and R-32 expected to come on-stream over Q2-Q3 of FY2024) would be key monitorable in FY2024.

Outlook

SRF is a quality player and its investment in specialty chemicals and China plus one opportunity provides strong long-term earnings growth prospects. A valuation of 25x its FY2025E EPS seems reasonable. We maintain a Buy rating on SRF with an unchanged PT of Rs. 2,745.

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