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SRF Q1 numbers in line; upbeat guidance for key segments maintained

ICICIdirect Research 26 Jul 2022 DISCLAIMER

What's Buzzing

SRF reported strong topline growth led by all segments, while OPM missed owing to lower than expected margins from Chemical segment. 

Context

SRF reported top-line growth of 44% YoY to 3894.7 crores against our expectations of 3583.9 crores led by strong performance from all segments. The revenue from chemical was up by 55% YoY to 1722.4 crores, while the same from technical textile increased by 16% YoY to 571 crores. The revenue from packaging film and other segments stood at 1496 crores (up 44%) and 105.6 crores (up 97% YoY) respectively. OPM for the quarter expanded by 60bps YoY to 25.5% resulting into EBITDA growth of 48% YoY to Rs 995 crores against our estimate of 945.1 crores. The expansion in operational performance is on account of better gross margins (52.3% v/s 50.7% in Q1FY22). PAT increased by 54% YoY to Rs 608 crores against our estimates of 590.1 crores

Perspective

Since the management's endeavor has persisted to efficiently use the cash flows towards the value added product portfolio, it has been able to generate decent return ratios over the last few years. Focused capex towards speciality chemicals keeping in mind higher consumption of fluoro-compounds across agrochemical and pharma to drive growth ahead. Moreover, Maiden foray into polytetrafluoroethylene (PTFE) through backward integration of R22 to diversify business risk, to a certain extent. Prudent and measured strategy to increase presence across other fluoropolymers is likely to enhance revenue visibility over the medium to long run. We expect better FCF generation and thereby allocation towards high RoCE generating business to assist the company to demand better valuations in the long run

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