YES Securities' research report on SRF
SRF’s 4QFY23 consol. operating profit at Rs 9.31bn (-2% YoY & +12%QoQ), stood above our estimates (YES: Rs 8.6bn). The beat on our estimates stemmed from above estimated strong performance in the chemicals business segment. The packaging film and technical textile business on the other hand continued to suffer headwinds. The operating margins in packaging film business declined further during the quarter and is perhaps at its cyclical bottom, however recovery could still take few more months. The chemicals business on the other hand has a strong prognosis, with more than 20% revenue growth expected in FY24. The growth is expected to be fueled by seven specialty chemical plants and three fluorochemical plants on course for commissioning in FY24 along with 7-8 new active ingredients under development and due for commercialization in coming years. The PTFE plant while slightly delayed is now due for commissioning by mid-Jun’23, whereas the R-32 plant is due for commissioning in Jul’23, thereby likely to contribute to 2HFY24 earnings.
Outlook
Maintain BUY with a Mar’24 TP of Rs 3135/sh. Our DCF based target price implies a target multiple of 35x FY25e, as against 28.6x the stock is currently trading at.
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