SRF's specialty Chemicals has been witnessing a lull purely because China has upped the ante and started competing directly with Global innovators (customers of SRF). The management sees early signs of recovery in select pockets of Agchem whereas Pharma foray is tracking internal expectations.Nirmal Bang highlight that SRF, being the domestic market leader in hydrofluorocarbons should benefit disproportionately from the pricing tailwinds in HFC gases.
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Nirmal Bang Report
Following SRF Ltd.'s September-quarter results, Nirmal Bang has maintained its Buy rating with a target price of Rs 3,000 using SOTP valuation, blended target EV/Ebitda multiple of ~16 times on Sep'28E.
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Nirmal Bang is building in revenue/Ebitda/adjusted profit after tax compound annual growth rate of 17%/19%/19% over FY26-29E and also factoring in 236 bps ROIC improvement over the same period.
While SRF's Q2 FY27 operating performance missed Nirmal Bang and consensus estimates, the management sounded incrementally optimistic on sequential recovery in H2 FY27 and updated chemicals segment revenue guidance from 15%-20% to ~20% in FY27. Nirmal Bang likes the management's approach of diversifying within each segment and cater to newer high growth areas like battery, semiconconductor etc.
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Further SRF's HFO foray, Chemours agreement and further expansion in fluoropolymers (both high growth segments) through the new Odisha land augur well for medium-term growth.
Reducing salience of thin packaging films and new value added launches (with focus on aseptic packaging, battery and electronics industry etc.) should enable packaging film deliver industry leading operating performance.
Nirmal Bamg continues to remain positive on complex fluorination space. New launches in Agchem (intermediates for novel molecules) and Pharma foray will diversify the specialty portfolio further.
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