Buy SRF; target of Rs 2745: Sharekhan

Sharekhan's research report on SRF

Q3 result was weak with a 12% miss in the consolidated PAT at Rs. 253 crore (down 16% q-o-q) due to continued headwinds of inventory rationalization for specialty chemical, pricing led margin pressure for ref-gas and challenging environment for packaging films. Chemical/packaging film/technical textile EBIT declined by 7%/42%/8% q-o-q to Rs. 322 crore/Rs. 45 crore/Rs. 69 crore in Q3FY24. Management indicated that Q4FY24 to be better as it has witnessed significant recovery in specialty chemical, expect ref-gas price to be more rational and sees traction in new molecules. SRF commissioned PTFE, HFC expansion, Aluminium foil facility and guided for capex of Rs. 2,000-2,200 crore for FY25.

Outlook

We maintain our Buy on SRF with an unchanged PT of Rs. 2,745. SRF is a quality player and its investment in specialty chemicals provides strong long-term earnings growth prospects. Valuation seems reasonable at 24x its FY2026E EPS.