Brokerages are bullish on SRF Limited after the company posted its earnings for the quarter ended March 2022. Long-term investors have made big gains by investing in this stock as it has surged over 5,000 per cent in the last ten years.
The stock closed 6 per cent higher at Rs 2,239.25 against the previous close of Rs 2,111.90 on BSE on Wednesday. The market cap of the company rose to Rs 66,376.08 crore.
Yes Securities noted that SRF reported a robust operating profit, broadly in line with the street estimates. The strong YoY growth during the quarter was primarily driven by strong earnings traction from the Chemicals business.
It highlighted that the EBIT margins also improved QoQ on partial pass-through of increase in costs, with incremental pass though likely in coming months, margins could improve further. The packaging films business benefitted from higher volumes with actional capacities in Thailand and Hungary coming on stream.
"In coming months while demand for BOPP films is expected to remain healthy, however pressure on BOPET margins is expected on account on competing capacity addition globally. The growth in technical textiles was led primarily by healthy demand for belting fabrics and polyester industrial yarns, even as demand for nylon tyre cord fabrics remained weak. We maintain 'Buy', with a target price of Rs 2,920 per share," it added.
ICICI Securities said that the company has a strong capex plan of Rs 25-27 billion for FY23. The chemical segment will get highest capex share of Rs 17-18 billion, of which Rs 11-12 billion will be in fluorocarbon business. This ensures over 45 per cent EBIT growth for the chemical business (on high base) even in FY23. Also, the packaging films and technical textiles margins may see moderation in FY23.
"We have increased our EPS estimates by 6-20 per cent over FY23E-FY24E and, accordingly, we increase our target price to Rs 2,310 (from Rs2,141). We cut chemical business EV/EBITDA multiple to 22x (from 24x) on higher ref-gas mix," it added.
SRF reported 59 per cent increase in consolidated net profit to Rs 606 crore on a 36 per cent rise in revenue to Rs 3,549 crore in Q4 FY22 as compared with corresponding period last year.
SRF Limited is a chemical-based multi-business entity engaged in the manufacturing of industrial and specialty intermediates.
The company’s business portfolio covers Fluorochemicals, Specialty Chemicals, Packaging Films, Technical Textiles, Coated and Laminated Fabrics.
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