Why SRF stock climbed 6% even after posting 33% drop in Q2 profit; Details

The company aims to add a manufacturing facility with a capacity of 60,000 million tonne per annum within the next 25 months

SRF shares gained 6.2 per cent on Wednesday and clocked an intraday high of Rs 2,311.90 per share on the BSE. The shares gained after the company informed that its board of directors has approved a project for setting up a manufacturing facility for Biaxially Oriented Polypropylene (BOPP)–Biaxially Oriented Polyethylene (BOPE) film (including metalliser) at Indore. Simultaneously, strong commentary by the company's management post Q2 results also boosted confidence. 

BOPP films are used for packaging, labels, insulation, tapes, etc., while BOPE is similar to BOPP but it is made from polyethylene. That apart, a metalliser refers to a machine or a process used to apply a thin layer of metal onto a substrate, typically plastic films, for various purposes. 

 

At around 12:12 PM, SRF share price was up 5.81 per cent to Rs 2,291.85 per share. In comparison, the BSE Sensex was up 0.38 per cent at 80,524.52 around the same time. The market capitalisation of the company around the time stood at Rs 67,936.12 crore. 

"We wish to inform you that the Board of Directors at its meeting held on October 22, 2024, has approved the project for setting up manufacturing facility for BOPP – BOPE Film (including metalliser) at Indore," the filing read. 

A capacity of 60,000 MTPA will be added to the manufacturing facility within 25 months and the company will require Rs 445 crore as investment, it added. The project aims to expand the company's business verticles.

Meanwhile, the chemicals manufacturing firm reported its Q2 results during market hours on Tuesday. It posted a 33 per cent decline in its consolidated net profit to Rs 201.42 crore, for the second quarter of this fiscal on higher expenses and announced plans to invest Rs 1,100 crore on new plants to manufacture fourth-generation refrigerants.

Its net profit stood at Rs 300.78 crore in the year-ago period.

The company's total expenses also increased to Rs 3,173.97 crore in the second quarter from Rs 2,791.67 crore a year ago.

However, the management said that in the coming quarters, the company will start seeing an improvement with a likelihood of a strong finish to the year.

SRF Chairman and Managing Director Ashish Bharat Ram said, "While the performance this quarter has been expectedly subdued, I believe the worst is now behind us. We will start seeing an improvement from this quarter onwards with a likelihood of a strong finish to the year."

In the past one year, SRF shares have gained 0.16 per cent, compared to the BSE Sensex's climb of 24 per cent during the period.