SRF Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from SRF Limited (SRF) Q3 FY24 Earnings Concall

• Financial Performance
  • Revenues down 12% YoY to INR 3,053 crores.
  • EBIT down 37% YoY to INR 457 crores.
  • PAT down 50% YoY to INR 253 crores.
  • Weakness in chemicals and packaging films segments.
• Outlook
  • Expect significant growth recovery in Q4.
  • End markets poised to rebound.
  • Well placed to deliver sustained performance.
  • Specialty chemicals affected by inventory rationalization; expect recovery in Q4 as situation improves.
  • New products and facilities to drive growth.
  • Gases business impacted by lower volumes and realizations.
  • Pricing expected to be more rational going forward.
• Capex and Investments
  • INR 1,800 crores capex in 9M FY24.
  • Additional INR 700 crores planned in Q4.
  • Some delays seen in project timelines due to external factors.
  • Execution much better than peers; already seeing positive impact of some projects.
  • Confident of ramp-up continuing over next 12-18 months based on demand outlook.
  • INR 1,100 crores of approved multi-year capex to be incurred over FY25 and FY26.
  • Expect FY25 capex around INR 2,000-2,200 crores with 80% focused on chemicals segment.
  • Long-term guidance of INR 15,000 crores over 5-6 years remains intact.
• Agrochemicals Project Outlook
  • INR 1,100 crores capitalized in 9M FY24.
  • Additional INR 700 crores in Q4.
  • Ramp up across new molecules underway.
  • Traction visible, expect momentum in Q4.
  • Full year guidance after budgeting exercise.
• PTFE and Aluminum Projects
  • PTFE capitalized in Oct 2022, approvals underway.
  • 6-12 months for PTFE ramp up.
  • Aluminum awaiting global approvals.
  • Initial ramp up in 6 months, full in 12-18 months.
  • Operating leverage to play out over 1-2 years.
• Packaging Films Business
  • Difficult business environment persists.
  • Pricing pressure and lower utilization continued.
  • Sequential decline due to seasonal factors.
  • Some cost benefits on annualized basis.
  • Capacity utilization was around 90-91% in Q3.
  • Indicates healthy demand and operating rates for the business.
  • BOPET oversupply to persist for next 12 months, limiting margin expansion.
  • New BOPP capacities may also pressure margins despite demand growth.
• Specialty Chemicals
  • Revenue declined around 10-11% in the first 9 months of the year vs prior year.
  • Still hopeful of achieving single-digit revenue growth target for FY24.
  • Actively looking for alternative products and customer positions.
  • Remain very positive on growth recovery potential for specialty chemicals in Q4.
• Fluorochemicals Business
  • Seeing some demand weakness in certain agrochemical applications.
  • Pricing has moderated from peak levels seen in FY22 for some refrigerant gases.
  • But long-term demand outlook remains strong given rebound in US/Europe and growth in India/SE Asia.
• China Competition
  • Seeing aggressive pricing in refrigerant gases as China looks to liquidate excess inventory.
  • Cost competitiveness remains strong; issue is China pricing below variable costs.
  • Most competition in subsets where capacities/inventories have built up in China.
• New Product Traction
  • Launched 15 new agrochemical products, 2 more planned in Q4.
  • New products seeing less competition from China currently.
  • Starting to see orders/revenue contribution; key growth driver.
• Domestic Refrigerant Gas Outlook
  • Q1 strongest quarter domestically given seasonal demand.
  • Market set to grow in medium term driven by increasing refrigeration needs.
  • Well positioned given limited competition in domestic HFC space.
  • 35-40 stores have achieved ROI showing profitable model.
• Pharma Segment Traction
  • Currently small contributor to specialty chemicals revenue.
  • Seeing positive momentum; growth contribution expected in mediium term.
  • Agrochem remains largest segment currently.