All that you need to know about SRF Limited at a glimpse

Stock Data:

Ticker	SRF
Exchange	NSE
Industry	Chemicals

Price Performance:

Last 5 days	1.99%
YTD	1.6%
Last 12 months	35.7%

Why is the stock price rising?

Impressive quarterly results led to the overall rise of the stock price – Revenues were up 44% on year to INR 3894.7 crores driven by the chemical segment. Sales at cement segment rose 55% YoY to INR 1722.4 crores. This growth from the chemical segment was driven by robust demand for flagship products. Apart from this, higher realization growth in the refrigerant gas segment along with packaging film supported overall growth of the company. 

Witnessing such stellar performance, the Board at its meeting held on Friday has approved first interim dividend for 2022-23 of Rs. 3.60 per fully paid up equity share of Rs. 10 each.

Management Commentary:

“It has been a stellar quarter for the Company. The outlook for our Chemicals Business remains strong and we believe the investment intensity will increase in this segment. While our Packaging Films Business performed very well, we see strong headwinds for the Business with weak global demand and inventory losses in the short term.”

Ashish Bharat Ram, Chairman and Managing Director

Competitive advantage:

Has solid moat in its fast growing fluorochemical segment, as there are no low cost competitors to it. On the other hand, the backward integration and vast product portfolio in the fluorochemicals space is giving SRF a competitive advantage.  

About SRF:

SRF is a chemical conglomerate engaged in the manufacturing of industrial and specialty intermediates. The company’s business portfolio covers fluorochemicals, specialty chemicals, packaging films, technical textiles, coated and laminated fabrics.

Promoters (in %)	June 21	Sept 21	Dec 21	Mar 22	June 22
Kama Holdings Limited	50.77	50.77	50.73	50.73	50.73
Arun Bharat Ram	0.05	0.05	0.05	0.05	0.05

Growth factor:

A key catalyst for the growth of the company would be the continuous CAPEX towards the specialty chemical across the agrochemical and pharma industry. For the same reason, the Board has approved a project to set up a 1,000 (Metric Ton per Annum) MTPA facility, to produce an agrochemical intermediate at Dahej at a cost of INR 250 Crore. Further, the board has also approved a project for capacity expansion of a Pharma/Agrochemical intermediate product at Dahej at a projected cost of INR 72 Crores. The Board has also approved a project for capacity expansion of belting fabrics operations at its technical textiles business unit in Viralimalai, from 1,100 metric tons per month (MTPM) to 1,800 MTPM, at a projected cost of INR 162 Crores, to be spent over a period of three years. Also, to cater to the growing requirements of new and upcoming plants at Dahej, the Board has approved a project to create two technical structures for new plant buildings for certain agrochemical products at an estimated cost of ₹78 crore.

Another element for the growth in the stock price of the company could be the firm’s ability to venture into PTFE through backward integration of R22. This would reduce the business risk to a certain extent. With a swift planning to increase presence across other fluoropolymers can grow revenue visibility meaningfully over the long run.

Our View:

On the basis of strong revenue growth across all business verticals, and additional capex announcements for the chemical business, we remain positive about the stock. We further believe that robust demand for flagship products and derivative products will drive healthy performance in the specialty chemicals business. Additionally, the Chloromethane and PTFE capacity additions would drive volume growth while expectations for firm refrigerant gas prices would lead to healthy realizations in the short to medium run. On the other hand, global capacity additions on BoPET lines and high-cost inventory may pressure margins, though this could be partially offset by the stellar demand for BoPP products. 

Charts: