Broker’s Call: SRF (Buy)

SRF reported a 35% year-on-year revenue growth, which was in line with market expectations. However, profitability fell short of estimates due to rising input costs. The company's chemical business saw a 25% revenue increase, propelled by strong performance in the ref gas segment, while PFB revenue grew by 51%, driven by improved realization of raw material costs.

Technical textiles also grew by 26%. Management maintained its FY27 revenue growth forecast of 15-20% and raised expectations for the latter half of the year, citing firm pricing of ref gas and increased volumes in specialty chemicals. However, the company warned of near-term margin pressures due to high costs of raw materials, freight, and energy, with limited ability to pass these costs onto customers.

Despite these challenges, long-term growth opportunities persist, particularly through scale-up in fluoropolymer products, new Odisha HFO plant, expanding pharma and agrochemical pipelines, and an increasing focus on emerging industries. The broker has lowered EPS estimates for FY27, FY28, and FY29 by -8%, -5%, and -9%, respectively.

With a revised target price of ₹2,800 based on H1FY29 earnings (derived PE of 30x on H1FY29 EPS), the broker maintains a BUY rating for SRF.