Target: ₹3,085
CMP: ₹2,560.25
SRF has reported EBITDA/PAT at ₹ 930 crore/₹570 crore (Elara: ₹830 crore/₹470 crore) in Q4, versus ₹830 crore/₹510 crore in Q3FY23, as the specialty chemicals segment continued to see improvement along with a QoQ surge in technical textile segment’s earnings.
The Chemicals business may deliver stronger growth in FY24, while the packaging film segment is expected to underperform on oversupply concerns. Hydrofluorocarbon (HFC) usage and supply cut in the US by 30% from January 2024 may lead to some earning volatility by end-FY24, but hydro-fluoro-olefins (HFO) opportunity by H2FY25 with expiry on its patents gradually may offset the HFC volume dip by FY25.
SRF has announced a capex of ₹710 crore on agrochemical intermediate and specialty fluoropolymers.
We value SRF on DCF, assuming a 5 per cent terminal growth rate and 11.8 per cent cost of capital, with an average EBITDA margin of 23.1 per cent (from 23 per cent) in FY23-25 and 24 per cent in FY26-30.
Maintain Buy with a TP of ₹3,085. Our implied target is 20.0x FY25E EV/EBITDA and 31.4x FY25 P/E.