Motilal Oswal has given Neutral recommendation for SRF with a target price of Rs. 2510 in its research report issued on Sep 22, 2022
Motilal Oswal’s research report on SRF
In this report, we have analyzed SRF’s Packaging Films division. The company has aggressively expanded its capacity to capitalize on the impending opportunity in the Packaging Film industry, with a shift in consumer buying behavior. We have analyzed the Packaging Film industry and the competitive intensity of SRF. The key highlights are as follows: Over the last seven years, SRF aggressively incurred a cumulative capex of INR32.3b on building its Packaging Film division, resulting in an industry leading revenue/EBIDTA CAGR of 21%/39%, followed by Polyplex Corporation (PPC) at 11%/24%. Global demand for Packaging Films is expected to be driven by low penetration of packaged food, higher adaptability of Flexible Packaging, rising trend toward easily recyclable packaging solutions, innovative packaging, and e-commerce. However, higher competitive intensity and additional capacity build up in the industry may pressurize industry profitability in the short term.
While we expect the management to cash-in on these opportunities, we maintain our Neutral rating, given to its rich valuation, which has been priced into its near-term upside.