SRF Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from SRF Limited (SRF) Q1 FY23 Earnings Concall

Q&A Highlights:

• Rohit Nagraj from Centrum Broking asked about the fluoro specialty business, if the company is seeing any kind of demand contraction for the SRF business and view for FY23. Rahul Jain CFO replied that  given where energy prices are, the company has not seen any contraction and any of the customers looking to cancel orders or delaying it.

• Rohit Nagraj from Centrum Broking also enquired about ref gas pricing, and if it has stabilized or will it be increasing. Rahul Jain CFO answered that there has been increase in prices of some of the ref gases. Most of the increases happened over the last year or so. SRF is not seeing any large headwinds in terms of significant reduction in prices.

• Naushad Chaudhary with Aditya Birla asked about the capacity ramp up of the expected additional chloromethane capacity and the greenfield PTFE. Rahul Jain CFO answered that the chloromethane capacity can get capitalized in the next 2-3 weeks.

• Chintan Modi from Haitong Securities asked about the new investment pipeline of INR1,200-1,500 crore, if it includes the spec chem capex that is already under progress of about INR600-700 crores. Rahul Jain CFO answered that it is a new initiative that it has taken. SRF added that there will be new capex that will keep going on.

• Chintan Modi from Haitong Securities asked about the trend of EBITDA margins in specialty chemicals over last 3-4 years. Rahul Jain CFO answered that the EBITDA margin from a three year trend perspective for FY18, FY19 has been flattish. In FY20, FY21, FY22, all were in a growing position.

• Chintan Modi from Haitong Securities asked that after the PTFE plant commissions, what margins the company expects. Rahul Jain CFO answered that from what was budgeted, the company from a normalized perspective, SRF is about 40% higher in terms of EBITDA margin and GM should be in the range of 60-65% at current prices.

• Sumant Kumar from Motilal Oswal asked about chemical margins, if it will continue for the next 2-3 quarters as in 1Q23. Rahul Jain CFO replied that that margin should not be looked from a QonQ basis, but should be seen from a whole year perspective. On an annualized basis, there could be a margin expansion.

• Amar Mourya with AlfAccurate Advisors asked about when R gas 15,000 metric capacity is likely to commission and current utilization of R gas. Rahul Jain CFO answered that it is likely to be commissioned by 1Q24. And the utilization is almost full.