SRF rallies 8% on strong Q1 performance; market-cap zooms past Rs 50,000 cr

The stock hit a new high of Rs 8,535.95 as shares rallied 8 per cent on the BSE in intra-day trade on Friday

Shares of SRF rallied 8 per cent to hit a new high of Rs 8,535.95on the BSE in intra-day trade on Friday, rising 11 per cent in the past two trading days, after the company reported a strong operational performance for the quarter ended June 2021 (Q1FY22). A sharp up move in stock prices pushed market capitalisation (m-cap) of the company past Rs 50,000 crore-mark for the first time today.

At 09:58 am, the stock was up 7 per cent at Rs 8,502, with a market-cap of Rs 50,364 crore, the BSE data shows.

SRF is a chemical based multi-business entity engaged in the manufacturing of industrial and specialty intermediates. In Q1FY22, SRF's consolidated net profit more-than-doubled at Rs 395.3 crore against Rs 176.9 crore in Q1FY21. The company reported a 75 per cent year-on-year (YoY) growth in revenue at Rs 2,699 crore compared with Rs 1,545 crore in the corresponding quarter of the previous fiscal. Ebitda (earnings before interest, taxes, depreciation, and amortization) margin improved 50 basis points (bps) to 24.6 per cent.

The company said during the quarter, the specialty chemicals business which accounts for 42 per cent of total revenue, performed well owing to higher sales from exports and domestic markets. The fluorochemicals business witnessed higher sales volumes in the refrigerants and the blends segments, with better sales realisations, especially from the export markets.

In Q1FY22, the technical textiles business reported operating profit of Rs 134 crore as against a loss of Rs 14 crore in Q1FY21. Re-structuring of margin profile with long-term customers has contributed to the overall performance of the technical textiles business. In addition, higher sales volumes from the nylon tyre cord fabrics, belting fabrics and polyester industrial yarn segments augured well for the business, the company said.

To meet the growing demand for refrigerants in the domestic and exports market, the company's board approved a project for integrated expansion of fluorocarbon based refrigerant capacity at Dahej at a projected cost of Rs 550 crore. The same is expected to be completed in twenty-four months. To cater to the growing power requirements of new and upcoming plants at Dahej, the board has also approved the installation of 200 KV grid at a projected cost of Rs 135 crore.

"SRF's performance in the last three years has been robust, with revenue/EBITDA/PAT CAGR of 15 per cent/33 per cent/42 per cent. The stock price over the same period has grown by around 40 per cent CAGR. Earnings momentum is likely to slow down due to margin contraction in the packaging films segment (EBIT margin of 27.3 per cent in FY21 v/s 20-21 per cent in FY22-23E) and reduced growth momentum in specialty chemicals due to a high base (three years revenue CAGR of 60 per cent v/s 26 per cent for FY21-23E). Going forward, we expect SRF to post a revenue/EBITDA/PAT CAGR of 26 per cent/22 per cent/26 per cent over FY21- 23E," Motilal Oswal Financial Services said in a result update.