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.