SRF hits record high in weak mkt; stock up 33% in 1-mth on healthy outlook

In the past one month, SRF has outperformed the market by surging 33 per cent, due to initial signs of demand recovery in Q3FY25, as compared to 2.5 per cent decline in the BSE Sensex.

Shares of SRF hit an all-time high of Rs 2,940, as they rallied 4 per cent on the BSE in Monday’s intra-day trade in an otherwise weak market on healthy outlook. The stock of the specialty chemicals maker surpassed its previous high of Rs 2,864.35 touched on September 14, 2022. In comparison, the BSE Sensex was down 0.4 per cent at 77,199 at 02:36 PM.

 

In the past one month, SRF has outperformed the market by surging 33 per cent, due to initial signs of demand recovery in Q3FY25, as compared to 2.5 per cent decline in the benchmark index. A sharp rally in stock price has seen the market capitalisation of SRF inch towards Rs 90,000 crore. Currently, SRF’s market capitalisation stood at Rs 87,090 crore, the BSE data shows.

 

The overall macro scenario is showing some signs of revival for the Chemicals business (67 per cent EBIT mix in FY25E), coupled with management’s expectations of strong sequential growth in the March 2025 quarter (Q4FY25) with further improvement from FY26. This will be led by a healthy launch pipeline and a demand recovery in specialty chemicals, a ramp-up of exports/ domestic volumes in the Fluorochemicals business and pricing improvement in the overall chemicals business, according to analysts.

 

Meanwhile, in the October-December quarter (Q3FY25), SRF reported improvement in earnings with 7 per cent year-on-year (YoY) growth in consolidated profit after tax (PAT) at Rs 270 crore. The company had posted PAT of Rs 253 crore in a year ago quarter (Q3FY24).

 

The consolidated revenue of the company increased 14 per cent to Rs 3,491 crore in Q3FY25, from Rs 3,053 crore in the year-ago period. Its earnings before interest and tax (EBIT) increased 16 per cent to Rs 529 crore in Q3FY25, from Rs 457 crore in Q3FY24. The company's Ebitda margin improved to 19.9 per cent in Q3FY24, from 19.7 per cent in Q3FY24.

 

The management said the company has seen a decent recovery this quarter. Building on the momentum, they expect to finish the year on a reasonably strong footing. "The quarter experienced significant strength of the dollar against major currency pairs, which negatively affected the results due to exchange currency fluctuations. On the other hand, a weaker rupee is favorable for the company over the long-term," the management said.

 

During the quarter, the company's specialty chemicals business continued to experience some overhang of inventory buildup among agrochemical customers. However, there appears to be a gradual increase in demand. The packaging films business demonstrated satisfactory performance. SRF maintained a strong position within the industry, although margins in aluminium foil experienced pressure due to lower-cost imports from China and Thailand.

 

However, its technical textiles business underperformed due to lower demand and margins in the Belting Fabrics segment. On the positive side, the polyester industrial yarn segment reached full capacity utilisation, SRF said. The coated fabrics segment experienced slower performance due to weak demand in the domestic market. The laminated fabrics segment performed in line with expectations, it added.

 

Motilal Oswal Financial Services (MOFSL) earlier downgraded SRF following its Q4FY21 results, anticipating a slowdown in overall business momentum. SRF has underperformed the overall indices during the last three years (SRF’s share price compound annual growth rate (CAGR) has been 3.6 per cent vs. Nifty/Sensex CAGRs of ~10.2 per cent/10.6 per cent). However, considering the healthy business outlook across segments, MOFSL upgraded SRF to BUY (from Neutral) valuing the stock on an SoTP basis to arrive at its target price of Rs 3,540.

 

Analysts at Elara Capital raised FY26E/27E EPS by 8 per cent/18 per cent due to better demand and pricing environment after Q3FY25 management commentary. However, the brokerage firm said they still await commentary from global major chemical players as regards CY25 demand outlook.