Sharekhan has given Buy recommendation for SRF with a target price of Rs. 2430 in its research report issued on Dec 15, 2021

Sharekhan’s research report on SRF

SRF’s management expects specialty chemical business to grow steadily by 15-20% p.a. in 3-5 years, while the fluorochemicals business would benefit from higher refrigerant prices and huge demand from the US. Earnings momentum of technical textiles to stay strong, while rise in BOPET spreads bodes well for near-term margin of packaging film business. Capex intensity would stay high with a cumulative spending plan of Rs. 3,500-3,600 crore over FY22-23 of which ~60% would be in chemicals segment. Large projects include fourth MPP, fluorocarbon refrigerant facility, PTFE plant with R-22 and BOPP line at Indore. Management is confident of growth across segments and focused to invest in high-growth specialty chemicals and thus we expect strong revenue/PAT CAGR of 19%/23% over FY21-24E along with RoE/RoCE of 20.4%/22.2%. A likely ADD by India on R-125 imports from China would further add to profitability while logistic issues (although limited impact currently) could be a near-term concern.


A 15% correction in stock price from 52-week high provides a good entry opportunity given superior earnings growth outlook while strong FCF and robust balance sheet provides scope for capex led growth. Favourable dynamics of Indian specialty chemicals space would support premium valuations. Hence, we maintain a Buy on SRF with an unchanged PT of Rs. 2,430.

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