Buy SRF: target of Rs 2800: Sharekhan

Sharekhan's research report on SRF

Q4FY22 operating profit/PAT of Rs. 948 crore/Rs. 606 crore, up 47%/59% y-o-y beat ours/street’s estimates led by stronger-than-expected growth in chemicals (EBIT up 83%/20% y-o-y/q-o-q) and lower tax rate. Chemical business performed robustly, clocking a revenue growth of 36% y-o-y and EBIT margin expansion of 819 bps y-o-y to 32% led by higher margins in ref-gas and strong demand for specialty chemicals. Packaging film saw decent EBIT growth of 8.5% q-o-q and resilient margin of 19.8% (flat q-o-q). Technical textiles’ EBIT declined 20% q-o-q due to revenue de-growth and margin contraction. Specialty chemical segment’s revenue growth guidance of 20% for FY23 and ref-gas pricing to remain strong given favourable demand-supply. Chemical segment would sustain EBIT margin of 31%. FY23 capex target of Rs. 2,500-2,700 crore (~44% on high growth chemicals). A 24% fall in stock price from 52-week high provides a good entry opportunity given capex-led strong earnings growth outlook.

Outlook

Hence, we maintain a Buy on SRF with an unchanged PT of Rs. 2,800. At CMP, the stock trades at 28.3x/23.7x its FY23E/24E EPS.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More