SRF gains 5% ahead of board meet for bonus issue; jumps 50% in 3 months

The board of directors of the Company is scheduled to meet on Tuesday, August 31, 2021 to consider and approve issuance of bonus shares subject to approval by the shareholders of the Company.

Shares of SRF gained 5 per cent, hitting a new high of Rs 9,876.55 on the BSE in intra-day trade on Monday, a day ahead of the company’s board meeting to consider bonus issue plan.

On August 20, 2021, the company had informed the stock exchanges that the meeting of the board of directors is scheduled for Tuesday, August 31, 2021 to consider and approve issuance of bonus shares subject to approval by the shareholders of the Company. Since then, the stock rallied 10 per cent from level of Rs 8,902.

In the past three months, SRF has outperformed the market by surging 50 per cent, as compared to 10 per cent rise in the S&P BSE Sensex. SRF is a chemical based multi-business entity engaged in the manufacturing of industrial and specialty intermediates.

In Q1FY22, SRF's consolidated net profit more-than-doubled at Rs 395.3 crore against Rs 176.9 crore in Q1FY21. The company reported a 75 per cent year-on-year (YoY) growth in revenue at Rs 2,699 crore compared with Rs 1,545 crore in the corresponding quarter of the previous fiscal. Ebitda (earnings before interest, taxes, depreciation, and amortization) margin improved 50 basis points (bps) to 24.6 per cent.

The company said during the quarter, the specialty chemicals business which accounts for 42 per cent of total revenue, performed well owing to higher sales from exports and domestic markets. The fluorochemicals business witnessed higher sales volumes in the refrigerants and the blends segments, with better sales realisations, especially from the export markets.

To meet the growing demand for refrigerants in the domestic and exports market, the company's board approved a project for integrated expansion of fluorocarbon based refrigerant capacity at Dahej at a projected cost of Rs 550 crore. The same is expected to be completed in twenty-four months. To cater to the growing power requirements of new and upcoming plants at Dahej, the board has also approved the installation of 200 KV grid at a projected cost of Rs 135 crore.

In October 2020, SRF had raised Rs 750 crore by allotting 1.76 million equity shares through qualified institutional placement (QIP) at an issue price of Rs 4,250 per equity share.

Analysts are encouraged by the long-term structural opportunity in the chemicals sector and the company’s ability to participate in the same. HDFC Securities, for instance, has maintained its 'Add' rating on the stock given its healthy performance from speciality chemicals & packging films businesses, recovery in the technical textiles segment, strong balance sheet, and deployment of Capex towards high-growth speciality chemicals business over the next three-four years. However, the stock has moved up above brokerage firm’s target price of Rs 8,630 per share.