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Nirmal Bang Report
SRF Ltd.'s Q1 FY25 subdued earnings performance was primarily on account of continued global destocking in specialty chemicals and chinese competition. Packaging films showed some improvement QoQ, led by BOPP.
Despite a weak quarter for specialty chemicals, the management has maintained ~20% segment revenue growth guidance for FY25. Therefore, a lot is dependent on the recovery in H2.
Commentary on new molecules was very encouraging and is expected to be the key driver going forward. Overall capex for FY25 should be Rs15-18 billion, lower than earlier soft guidance.
We continue to remain positive on the structural opportunity and believe near term global uncertainty could offer a better entry point.
Maintain Accumulate after rolling forward the valuation to June-26E using SoTP methodology and an unchanged target price of Rs 2,400 (implied blended target multiple EV/Ebitda 15 times versus five-year median 18 times).
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