SRF Q4 Results Review - Chemicals Business To Grow At 20% Plus In FY24E: Centrum Broking

Centrum Broking Report

SRF Ltd.’s Q4 headline performance was largely inline however the composition varied with outperformance from chemicals business while packaging films business reported substantially muted performance.

For FY23 too, robust chemicals business margins led to 11.1%/ 14.5% rise in YoY Ebitda/profit after tax at Rs 35.3 billion/ Rs 21.6 billion while both packaging films business and technical textiles business deteriorated substantially.

Chemicals business reported highest ever quarterly Ebit margins at 35.2% (FY23 average at 31.6%). However, management guided for some tapering of margins going ahead.

Contrarily, packaging films business Ebit margins plummeted to the lowest ever quarterly at 3.6% (FY23 average at 10.7%). Management cited margins to remain under pressure in medium term however are expected to recover from hereon.

SRF remained confident of robust 20% plus YoY growth in CB for FY24E propelled by scale up in existing projects and commercialisation of new projects. Based on management guidance, and better chemicals business margins, we have upped our FY24E earnings estimates by 2.1% while lowering FY25E earnings by 4.0% considering margin normalisaiton. 

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