Hold SRF; target of Rs 3069 Prabhudas Lilladher

Prabhudas Lilladher's research report on SRF

SRF (SRF IN) reported consolidated revenue of Rs43bn, reflecting a 20.8% YoY and 23.5% QoQ increase, driven by positive momentum in recently launched products, demand pick up for certain key agrochemical intermediates and robust sales of refrigerants gases leading to 50% YoY and 106% QoQ increase in specialty chemicals segment revenue. The packaging film business grew by 216% and 16% QoQ as capacity utilization for both BOPP and BOPET improved during the quarter. However, lower demand and an influx of low-cost imports from China resulted in a subdued performance for the technical textiles segment. Going forward, we expect continued strength in refrigerants segment and some signs of recovery in the agrochemicals.

Outlook

However, pricing pressure from Chinese competitors continue to remain a threat for few products of the company. At a valuation of 49x FY27 EPS, we maintain “Hold,” on the stock with a target price of Rs3,069, based on a sum-of-the-parts (SOTP) valuation approach.

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