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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.
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