Sharekhan's research report on SRF
Revenue grew by 16% y-o-y to Rs. 2,146 crore, while margins expanded 429 bps y-o-y to 25.4%, which was largely in-line with street estimates. However, adjusted PAT at Rs. 303 crore (up 60% y-o-y) marginally lagged estimates due to a higher tax rate. Chemical/packaging film/technical textiles businesses reported strong revenue growth of 11.6%/25.7%/9.3% y-o-y to Rs. 906 crore/Rs. 802 crore/Rs. 367 crore. EBIT margin from these businesses increased by 334/307/764 bps y-o-y to 21%/26.5%/18.5%. Management is upbeat on sustained high growth for specialty chemicals business especially from agri-space and expects earnings recovery in Fluorochemicals over Q4FY21-Q1FY22 led by improvement in refrigerant gas prices.
Outlook
High capex intensity in specialty chemical business would drive superior long-term earnings growth and could further aid re-rating. Hence, we maintain a Buy on SRF with an unchanged PT of Rs. 6,760.
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