Target: ₹3,250
CMP: ₹2,854.00
We reiterate. But on SRF with revised SoTP-based TP of ₹3,250 (rollover to Mar-27E; up by 4.8 per cent), as we believe the worst is behind for all businesses of SRF.
The company has been seeing strong volume/pricing in refrigerant gases domestically. Prices of ₹32/22 are going up globally on increase in Chinese refrigerant gas prices, supply being capped by the freezing of quota across geographies, and the shift of OEM demand toward lower GWP gases. The fluorospecialty business is seeing improved traction in H1CY25, and the PFB business is likely to see near-term pressure and pricing/margins to improve over the coming 2-3 years.
Going forward, we should see gradual pick up in specialty chemicals driven by stabilisation of existing products and incremental contribution from newer products (largely Active Ingredients), firming up of refrigerant gas prices globally, led by increase in pricing in China and phase down-led cuts in some geographies and improvement in the packaging films business, led by narrowing of the demand-supply gap across BOPP and BOPET over the next 2-3 years.
SRF is best placed — with capex ready in the specialty chemicals business and a complete basket of refrigerant gases — to garner benefits of the agchem cycle turning around and improving refrigerant prices globally.
