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Specialty chemicals propel Q2 numbers as other segments subdued - SRF Q2 Review

ICICIdirect Research 07 Nov 2022 DISCLAIMER

What's Buzzing? 

SRF reported a mixed set of numbers wherein the specialty chemicals segment performed relatively well while technical textile and packaging films performed weak on margins. 

Context 

SRF reported topline growth of 31% YoY to Rs 3728 crore led by strong performance from specialty chemicals segment. The revenues from specialty chemicals were up 62% YoY to Rs 1830.2 crore, while the same from technical textile declined 16% YoY to Rs 466.2 crore. The revenue from packaging film and other segments was at Rs 1331 crore (up 24%) and Rs 100.4 crore (up 16% YoY) respectively. OPM for the quarter declined 310 bps YoY to 20.6% resulting in EBITDA growth of 14% YoY to Rs 769.1 crore. SRF reported PAT at Rs 481 crore against our estimates of Rs 628.6 crore (up 26% YoY). 

Our Perspective 

A strong performance in specialty chemicals in Q2FY23 was led by strong traction for new products and downstream derivatives. Fluorochemicals reported a steady performance on the back of higher realisation and stable volumes. Packaging films segment faced several headwinds, which impacted BOPET margins. Energy crisis in Hungary plant impacted margins. BOPET margins are expected to remain subdued in near term due to additional capacities, worldwide. We expect continuous capex towards specialty chemicals (aspirational target of Rs 12000 crore over the next five years) and venturing into niche fluoropolymer PTFE segment to drive growth ahead. Further capex announcement of Rs 604 crore has been announced towards agrochemicals, which will get commissioned in the next 10-12 months. Calibrated shift from commoditised segments to more remunerative fluorochemicals and other specialty segments is likely to drive future performances for SRF.

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