Sharekhan has given Buy recommendation for SRF with a target price of Rs. 2430 in its research report issued on Oct 26, 2021
Sharekhan’s research report on SRF
Q2FY22 operating profit/adjusted PAT of Rs. 675 crore/ Rs. 362 crore, up 18%/11% y-o-y missed our and the street’s estimate due to weaker-than-expected revenue/margin in the packaging film business, higher depreciation, and tax rate. Packaging films division reported muted revenue growth/margin decline of 2.9%/599 bps q-o-q given pressure on BOPET spreads. Technical textiles (TT)/chemicals business clocked strong revenue growth of 68%/28% y-o-y, while EBIT margin rose by 869/249 bps y-o-y to 23.8%/22.3%. Chemical margins were aided by better ref-gas prices; logistic issues sustain for specialty chemical players. Specialty chemical growth guidance of 15-20% for FY22 with H2 likely to better than H1; ref-gas margin to sustain given better pricing. Company guided for similar utilisation for TT.
We maintain a Buy on SRF with a revised PT of Rs. 2,430 given sustained high earnings growth outlook and RoE of 20.4%. Favorable dynamics of Indian specialty chemicals space would support premium valuations.