SRF Limited Reports 31% Revenue Grow, Buy Stock With Rs. 2900 Target Price: Top Brokerage Suggests

Top brokerage firm ICICI Securities has given a buy rating to the stock of SRF Limited. The company reported strong revenue growth of 31% YoY to Rs. 3727.8 crore. Additionally, its PAT increased by 26% YoY to Rs. 481 crore.

Stock To Buy: Target Price

The Current Market Price (CMP) of SRF Limited is around Rs. 2482. ICICI Securities has estimated a Target Price for the stock at Rs. 2900. This stock has the potential to give a 17% return, in the upcoming 12 months. It is a large-cap stock with a market capitalization of Rs. 73,579 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 2482
Target Price	Rs. 2900
Potential Upside	17.00%
52-week high share price	Rs. 2,865
52-week low share price	Rs. 1,973.10

Stock Valuation

The brokerage firm said, "Continuous capex towards speciality chemical on the back of higher consumption of fluoro compounds across agrochemical and pharma to support strong business performance in years to come. Venturing into PTFE through backward integration of R22 diversifies business risk, to a certain extent. Control over working capital along with better operational performance to improve FCF generation."

Strong Q2 Earnings

Its sales growth was in line with estimates led by chemicals while margins were below expectations due to cost pressure in packaging and technical textiles divisions. The company's reported revenue growth was 31% YoY to Rs. 3727.8 crore, led by chemical (up 62% YoY), technical textile (down 16% YoY), packaging film (up 24% YoY) and other segment (up 16% YoY). Its gross margins contracted 200bps YoY to 47.6% while EBITDA margin fell 310 bps YoY to 20.6%. Absolute EBITDA was up 14% YoY to Rs. 769.1 crore.

Further Potential

Continuous capex towards speciality chemical on the back of higher consumption of fluoro compounds across agrochemical and pharma to support strong business performance in years to come. The company is venturing into PTFE through backward integration of R22 diversifies business risk, to a certain extent. Control over working capital along with better operational performance to improve FCF generation.

About the stock

The company was incorporated in 1970, SRF started with nylon cord tyres and thereafter diversified into refrigerant gases, speciality chemicals and packaging film to name a few over time. Chemical division forms 43% of overall revenue followed by packaging film (39%), technical textile (15%) and others (3%). The company exports to more than 90+ countries. Revenue from international market constitutes 57% of overall revenue while rest is from the domestic market segment.

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.