Specialty Chemical Stock Up 4% On Turning Ex-Dividend For 36% Dividend Payout; Prabhudas Lilladher Says Buy

Specialty Chemicals stock, SRF witnessed a strong buying on Tuesday as it traded ex-dividend for a 36% dividend payout. The stock has rallied by over 4% on BSE. Also, Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher has added the stock as her technical pick while recommending a buy. Parekh sees over 13% upside ahead in the near term. However, the 12-month target of SRF expects a potential rise of over 44%.

On BSE, the stock ended at Rs 2248.90 apiece, up by Rs 79.25 or 3.65% on Tuesday. The stock has gained by at least 4.2% with an intraday high of Rs 2259 apiece earlier in the trading hours.

As per the regulatory filing, the company's board declared an interim dividend of Rs 3.6 per share aggregating to 36% of the paid-up equity share capital.

Last week, it said, "The Interim Dividend would be paid to members whose names appear on the Register of Members and the beneficial owners as per details received from National Securities Depository Limited and Central Depository Services (India) Limited, as on the Record Date i.e. Tuesday, the 01st August 2023."

That being said, this large-cap stock has turned ex-dividend today. Those investors who hold SRF shares by the end of the August 1st trading session are eligible for the dividend payout.

In the first quarter of FY24, the company's consolidated revenue declined 14% from Rs 3,895 crore to Rs 3,338 crore in Q1FY24 when compared with Corresponding Period Last Year (CPLY). The company's Earnings before Interest and Tax (EBIT) decreased 37% from ₹938 crore to ₹595 crore in Q1FY24 when compared with CPLY.

While the company's Profit after Tax (PAT) decreased 41% from ₹608 crore to ₹359 crore in Q1FY24 when compared with CPLY.

Nevertheless, brokerages are optimistic about SRF shares ahead.

Recommending Buy on the stock under technical pick, Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher in a note on Tuesday said, "SRF has witnessed a decent correction from 2600 zone and has bottomed out at around 2100 levels near the previous low made, thereafter with a decent pullback seen has currently made a bullish positive candle on the daily chart. With the bias turning positive and also with the RSI well placed which is on the rise indicating a trend reversal to signal a buy."

Accordingly, she added, "We anticipate further rise with much upside potential seen and we suggest buying this stock for an upside target of 2550 keeping the stop loss near 2120 level."

Meanwhile, post the Q1 results, JM Financial analysts in their research note said, "We believe SRF should be able to achieve ~18-20% revenue growth in the fluoro-specialty business in FY24 (vs. 37% revenue CAGR over FY20-23) given i) most of its agrochemicals intermediates offering is for the patented products where the inventory drawdown impact might be limited; and ii) no announcement on postponing new product launches."

In JM Financial's view, given most of SRF's upcoming projects are going to be dedicated (currently ~80-85% of fluorospecialty revenue), even if spec-chem growth tapers down to ~15% in FY24, some of the volumes could be deferred to FY25 given there is no underlying demand concern indicated by its customers. Moreover, there will also be a large contribution from pharma intermediates and the PTFE plant in FY25 and beyond.

Hence, the brokerage said, FY24 should be considered as a base reset year and a good opportunity to BUY the name. It has set a target price of Rs 3,245 apiece, hinting at an over 44% upside in 12-months.