SRF - Better Placed To Withstand Headwinds: HDFC Securities

HDFC Securities Institutional Equities

Inventory rationalisation by agrochemical companies owing to rising inventory carrying costs and aggressive product pricing by Chinese manufacturers to regain market share has adversely impacted business from the agrochemical industry.

SRF management does not expect this situation to continue long and believes that customers will restock inventories. Management expects Q3 FY24 to be better than Q2 FY24 and Q4 FY24 to be better than Q3 FY24 as demand for agrochemicals from farmers is still healthy.

The management envisages singledigit growth in the specialty chemical business in FY24 while 15-20% YoY growth in FY25.

Demand for hydrofluorocarbon will remain stable while production will reduce which will lead to a jump in prices. R-32 will be in short supply in the next three-four years as it is the vital HFC refrigerant for the future.

SRF commissioned the PTFE plant in October. The company is expecting product approval for modified PTFE in a couple of quarters and aiming for the share of modified PTFE to reach 50%.

We are maintaining an 'Add' recommendation on SRF with a target price of Rs 2,590.

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