SRF's chemicals biz leads Q2 growth; analysts stay bullish; check targets

Chemicals company SRF reported a strong year-on-year (Y-o-Y) jump in profit for the September quarter (Q2FY26), led by a sharp improvement in its chemicals business, even as performance in other segments remained mixed. 

 

Brokerages maintained a positive stance on SRF, highlighting continued margin strength, steady volume growth, and the company’s strategic capex expansion.

 

Emkay Global Financial Services said SRF’s second-quarter earnings were broadly in line with expectations, driven by healthy margins and strong showings from the chemicals segment. 

 

The company reported earnings before interest, tax, depreciation and amortisation (Ebitda) of ₹780 crore, up 44 per cent Y-o-Y but down 7 per cent sequentially (Q-o-Q). The figure was marginally below Emkay’s estimate of ₹800 crore and lower than the Street consensus of ₹820 crore.

 

 

According to Emkay, the Y-o-Y margin improvement was led by firm refrigerant gas pricing in export markets, higher volumes in specialty chemicals, operational efficiencies, and better realisations in packaging films and aluminum foil. The brokerage noted that SRF’s management maintained its FY26 revenue growth guidance of 20 per cent for the chemicals business, while revising its overall capital expenditure target to about ₹2,200–2,300 crore for the year.

 

“Healthy margin performance was led by strong refrigerant gas pricing and operational efficiency gains,” Emkay said in a note. “We expect earnings momentum to continue in the second half, driven by volume growth in chemicals.” The brokerage retained an “Add” rating on SRF with an unchanged target price of ₹3,250.

 

The chemicals business remained the star performer in the quarter, with revenue rising 23 per cent year-on-year to ₹1,670 crore. The segment’s Ebit margin surged to 28.9 per cent from 18.1 per cent a year earlier, aided by better realisations and efficiency improvements. 

 

SRF also announced an expansion of its tie-up with Chemours for manufacturing and distributing advanced fluoropolymers and fluoroelastomers. The associated project outlay was increased to ₹745 crore from ₹595 crore earlier, with commissioning expected by December 2026.

 

The company also acquired 300 acres of land in Gopalpur, Odisha, for ₹280 crore to support its chemicals business expansion.

 

Performance in other verticals was mixed. Revenue from the performance films and foil business was flat year-on-year at ₹1,410 crore, though margins improved to 8.4 per cent from 5.8 per cent due to higher value-added product sales, stronger BOPP realizations, and recovery in operations in Thailand and Hungary. 

 

The technical textiles business, meanwhile, saw revenue decline 11 per cent Y-o-Y to ₹470 crore, as Chinese imports pressured margins despite higher volumes of nylon tyre cord and belting fabric.

 

Nuvama Institutional Equities echoed Emkay’s positive tone, saying SRF “reported solid Q2FY26 results” despite a minor miss versus Street expectations. The brokerage highlighted strong traction in the chemicals division, particularly fluorochemicals, and maintained a “Buy” rating with a revised target price of ₹3,841, up from ₹3,622 earlier.

 

“SRF’s fluorochemicals segment continues to capitalise on robust global demand across refrigerants and fluoropolymers, achieving record volumes in Q2,” Nuvama said. The brokerage added that domestic and export prices for HFC-32 have risen sharply over the past year, providing sustained margin tailwinds.

 

Nuvama also cited SRF’s specialty chemicals division as the “cornerstone of structural growth,” supported by new agrochemical and pharmaceutical intermediates. The firm expects the launch of new active ingredients, including Tetraniliprole, to drive growth from Q4FY26 onwards.

 

The brokerage noted that the Odisha land acquisition would serve as the foundation for an integrated chemical complex, expanding both specialty and fluorochemical capacities.

 

While near-term global headwinds in agrochemicals could delay demand recovery, Nuvama believes SRF’s medium-term outlook remains intact, underpinned by the China+1 diversification trend and resilient domestic demand for refrigerants.

 

Both brokerages agreed that SRF’s chemicals division would remain the primary growth engine, supported by capacity expansion, strategic partnerships, and a deep innovation pipeline. Despite near-term softness in other businesses, the long-term investment case remains compelling.

 

“SRF is well-positioned to sustain strong margins and benefit from global shifts in the chemical supply chain,” Nuvama said.