SRF Share price: Anand Rathi initiates coverage on SRF with BUY rating and a target price of Rs 6340 per share

SRF is a chemical-based multi-business conglomerate engaged in the manufacturing of industrial and specialty intermediates. The company’s business is segmented into four segments Technical Textiles Business (TTB), Specialty Chemicals Business (SCB), Packaging Films Business (PFB), and Other Businesses. Anand Rathi initiates coverage on SRF with BUY rating and a target price of Rs 6340 per share.

SRF has operations in four countries namely India, Thailand and South Africa and a new facility in Hungary with commercial interests in more than ninety countries. The company also has its own R&D capabilities globally, especially in the niche domain of chemicals.

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In Q2 FY21, SRF has posted a growth of 16% in revenues at Rs 21464 mn in Q3 FY21 as against Rs 18505 mn in Q3-FY20. The operating profit margins for the company improved 500 bps to 26.4% and PAT margins stood at 15.1% at Rs 3242 mn.

The strong performance in SRF results was due to sustained performance by Specialty Chemicals Business and Packaging Films Business while Technical Textiles Business showed signs of recovery.
On the segmental front, all the business segments of SRF have returned to normal operations. The Specialty Chemicals business continued to post strong numbers in both domestic and overseas markets, higher capacity utilisations and Strong pipeline of new products. SRF continues to remain focused on high end molecules and 3 new process patents were granted in Q3 FY21.

Chloromethane capex proceeding as per schedule q The Packaging Films Business also posted strong growth with all the sub segments performing well due to better operating leverage, improved margins, and a healthy demand. New capacities in Thailand and Hungary aided further volume growth.

In the Technical Textiles Business, SRF business showed signs of improvement due to faster-than-expected recovery in the Tyre industry. The Belting Fabrics segment contributed significantly to the overall performance.

On the guidance front, SRF expects the global agrochemical market to continue to experience moderate growth, with the Hungary Greenfield facility now commissioned. The line is expected to ramp up in next few months with healthy demand anticipated from existing and prospective customers.

Also, with pickup in the economy, replacement demand is anticipated to be healthy in the ensuing quarters. Anand Rathi expects SRF to continue to grow its revenues in the medium term and also gradually improve margins as utilisation levels at new facilities increase.