SRF REPORTS NUMBERS IN LINE WITH ESTIMATES ACROSS THE BOARD

News:  SRF reported topline growth of 4% YoY to Rs 3469.7 crore against our expectations of Rs 3493 crore led by decent performance from specialty chemical segment. The revenue from specialty chemical was up 51% YoY to Rs 1756.6 crore vs 1761 crore (I-direct estimates), while the same from technical textile declined 21% YoY to Rs 425.9 crore vs.Rs 480 crore (I-direct estimates). The revenue from packaging film and other segments was at Rs 1202.7 crore (down 6%) vs. 1112 crore (I-direct estimates) and Rs 92.3 crore (down 14% YoY) vs. 100 crore (I-direct estimates), respectively. OPM for the quarter declined 232 bps YoY to 24% resulting into EBITDA de-growth of 5% YoY to Rs 833.5 crore against our estimate of Rs 881.8 crore. The contraction in operational performance is on account of higher power and fuel cost (up 15% YoY). OPM from chemical segment remained at 32% (+275 bps YoY), while the same from technical textile, packaging film and other segments was at 8%(-1308 bps YoY), 10% (-1006 bps YoY) & 10% (+189 bps YoY), respectively. SRF reported PAT at Rs 510.9 crore against our estimates of Rs 521.8 crore (up 1% YoY). Depreciation and finance cost were at Rs 150.7 crore (+8% QoQ) and Rs 62 crore (+39% QoQ), respectively, while other income de-grew immensely by 69% QoQ to Rs 10 crore

Views: The specialty chemicals sector continued to operate well due to high demand for new and flagship products. Moreover, a decline in raw material prices restored gross margins to its previous level. Furthermore, the management is planning a capex of Rs 12,500 crore in the next year five years towards specialty chemicals keeping in mind higher consumption of fluoro-compounds across agrochemical and pharma will drive growth ahead. The packaging industry is currently seeing a substantial reduction in margins as a result of new rivals. In textiles business, we believe subdued demand from end users' industry must have impacted the performance in current quarter. However, solid capex plans, opportunities across various chemistries in both agro and pharma verticals, entering into Specialty Fluoropolymers business we anticipate growth, going ahead. We would be coming out with a detailed report soon post the conference call

Impact: Neutral