Hold SRF, target price Rs 2220: ICICI Securities

ICICI Securities has hold call on SRF with a target price of Rs 2220. The current market price of SRF is Rs 2229.9.

SRF, incorporated in the year 1970, is a Large Cap company (having a market cap of Rs 66099.77 Crore) operating in Diversified sector.

SRF key Products/Revenue Segments include Chemicals (Industrial), Packaging Film, Textiles, Others for the year ending 31-Mar-2022.

Financials
For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 3479.67 Crore, down -7.47 % from last quarter Total Income of Rs 3760.52 Crore and up 3.67 % from last year same quarter Total Income of Rs 3356.54 Crore. Company has reported net profit after tax of Rs 510.90 Crore in latest quarter.

The company’s top management includes Mr.Arun Bharat Ram, Ms.Bharti Gupta Ramola, Mr.Tejpreet S Chopra, Mr.Puneet Yadu Dalmia, Mr.Lakshman Lakshminarayan, Mr.Raj Kumar Jain, Mr.Yash Gupta, Mr.Pramod G Gujarathi, Mr.Kartik Bharat Ram, Mr.Ashish Bharat Ram, Mr.Vellayan Subbiah. Company has BSR & Co. LLP as its auditors. As on 31-12-2022, the company has a total of 30 Crore shares outstanding.

Investment Rationale
Despite the brokerage's strong preference to the quality of chemical business build by SRF in the past decade, and management’s ability to pull earnings in challenging situation, the brokerage has retained its HOLD rating on SRF. ICICI Securities has cut its target price to Rs 2,220 (earlier: from Rs2,490). Also, it has cut its EPS estimates by 4.3% for FY23 and 1.3% for FY24 and rolled over valuations to FY25E. However, the brokerage has cutEBITDA multiple to 18x (from 24x; implied PE is 28-30x FY25E EPS) for chemical business as it believes margins have peaked, but could be at risk in case HFC prices decline in US / mix becomes unfavourable.

Promoter/FII Holdings
Promoters held 50.53 per cent stake in the company as of 31-Dec-2022, while FIIs owned 18.31 per cent, DIIs 14.7 per cent.