Hold SRF; target of Rs 1786: Edelweiss

Edelweiss' research report onSRF

SRF’s Q4FY17 top line surpassed estimate, but INR2.2bn EBITDA came 12% below estimate due to margin pressure across segments. PAT, at INR1.3bn, surpassed the INR1.2bn forecast led by forex gain. Chemical segment’s FY17 margin plummeted 470bps YoY to 19% due to weak global agrochem market. However, SRF is going ahead with capex as the segment’s long-term growth remains intact.

Outlook

We will monitor the global agrochemical scenario for any sign of improvement or wait for stock price correction to review our recommendation. Maintain ‘HOLD’ with revised TP of INR 1,786 (INR 1,738 earlier), based on our SOTP-based valuation.

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