SRF hits over 2-month low; slips 10% in three days on heavy volumes

In FY24, SRF's primary focus will be on profitability enhancement and further rationalisation of operating cost and working capital in the packaging film biz, its FY23 annual report said

Shares of SRF slipped 5 per cent to hit an over two-month low of Rs 2,317 on the BSE in Monday’s intra-day trade on the back of heavy volumes. The stock of the specialty chemicals company was trading lower for the third straight day, falling 10 per cent during the period. It was quoting at its lowest level since March 21, 2023.

At 10:22 am; SRF was trading 4 per cent lower at Rs 2,330 as compared to a 0.15 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped over 15-fold today. A combined 708,409 equity shares had changed hands on the NSE and BSE.

SRF is a chemical based multi-business entity engaged in the manufacturing of industrial and specialty intermediates. The company’s diversified business portfolio covers fluorochemicals, specialty chemicals, packaging films, technical textiles, coated and laminated fabrics.

For January-March quarter (Q4FY23), SRF had reported a decent performance largely led by the specialty chemicals segment. The company reported revenue growth of 6.1 per cent year-on-year (YoY) to Rs 3,719.3 crore, led by chemicals (up 34 per cent YoY) but pulled down by technical textile (down 13 per cent YoY), packaging film (down 17 per cent YoY) and other segment (down 1 per cent YoY).

Gross margins declined 311 bps YoY to 50 per cent while earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin declined 205 bps YoY to 24.7 per cent. Profit after tax declined 7 per cent YoY to Rs 562.5 crore.

On its outlook, SRF in its financial year 2022-23 (FY23) annual report, said that the company expects to see some green shoots on the back of a resilient Indian economy, the margins of the Tyre Cord Fabrics segment will remain under pressure due to cheap imports from China.

The company said it will focus on building its volumes. It remains optimistic about the growth of the Belting Fabrics segment as additional capacity comes on stream.

With the addition of new capacities and better utilisation, the Flurochemicals business is poised to grow in the coming year. Furthermore, the company expects to commission new plants and increase its overall HFC capacities. In addition, the company will also commission new Fluoropolymers plant at Dahej in FY24.

As regards to the specialty chemicals business, SRF said it continues to remain focussed on agrochemical and pharmaceutical segments, where it collaborates with major global innovators for process development, commercialisation, and production of complex, new age molecules. The business expects to continue expanding its product portfolio on the back of sustainable value chain and remain focussed on strengthening its position in the existing markets, the company said.

Margins in both BOPET and BOPP are likely to remain under pressure as new lines have been added and several more lines are in the pipeline. In FY24, SRF’s primary focus will be on profitability enhancement and further rationalisation of operating cost and working capital in the packaging film business, the company said.

In FY24, SRF expects demand to remain strong for both coated fabrics and laminated fabrics. In coated fabrics, the focus will be to enhance capacity and increase sales during the year. The business will also continue to work on various cost reduction initiatives for both the businesses.

Meanwhile, analysts at ICICI Securities retained their Buy rating on SRF on the back of sustained efforts to ride on the increasing opportunities for specialty + fluorochemicals across key industries, foray into fluoropolymer PTFE and optical visibility capex drive with a heavy tilt towards specialty chemicals.