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Nirmal Bang Report
SRF Ltd. delivered yet another earnings beat in Q3 FY23 (Ebitda growth ahead of consensus in nine out of last 11 quarters), wherein consolidated Ebitda came in ~10% above our estimate.
A strong operating performance despite multiple headwinds in the commodity segments was driven by a robust performance of specialty chemicals and fluorochemicals businesses (ref gases and chloromethanes).
Strong traction in new and existing products and robust demand outlook from overseas clients are the key drivers for specialty chemicals segment whereas growth in fluorochemicals was led by higher realisations in select hydrofluorocarbons, strong domestic demand and better visibility in the U.S. market.
The SRF management indicated that specialty chemicals segment’s revenue growth in FY23 should be significantly ahead of the earlier guidance of ~20%.
The packaging segment is expected to be under pressure in the near term on account of spread contraction, especially in BOPET. However, overall packaging segment margin should improve in FY24 from the current levels, adjusted for normalisation of Europe energy costs and other operating measures, as per the management.
It also announced fresh capex in the specialty fluoropolymers space to the tune of Rs 5.95 billion and has termed it as a strategic investment.
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