BENGALURU (Reuters) – Indian chemicals and polymers maker SRF posted a drop in profit for the sixth straight quarter on Tuesday, hurt by sustained weak demand in its mainstay chemicals business.
The unit consists of specialty chemicals, fluorochemicals and agrochemicals among others, contributes nearly half of company’s quarterly revenue.
SRF reported a consolidated net profit after tax of 2.52 billion rupees ($30.11 million), down about 30% from last year.
Total expenses jumped nearly 10%, led by rise in input costs.
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KEY CONTEXT
The chemicals industry has been grappling with high inventory and destocking for the past few quarters, leading to continuous pressure on volume and margins, according to analysts.
Jefferies analysts said in a pre-earnings note their channel checks suggested weakness in SRF’s specialty portfolio in first quarter. SRF’s largest product in specialty chemicals (~22% of segment revenues) has seen 16% price erosion in the past year on account of new Chinese capacity, the brokerage added.
PEER COMPARISON
Valuation Estimates (next Analysts’ sentiment
(next 12 12 months)
months)
RIC PE EV/EBI Revenue profit Mean # of Stock to Div
TDA growth% growth% rating analysts price yield
* target** (%)
SRF Ltd 38.59 21.56 14.75 27.53 HOLD 25 1.02 0.30
Coromandel 23.85 15.70 5.06 14.29 BUY 9 1.16 0.38
International
Ltd
Deepak 12.92 7.77 14.00 42.26 BUY 1 1.16 1.12
Fertilisers
and
Petrochemicals
Corp Ltd
PI Industries 34.22 23.18 15.56 3.89 BUY 23 0.94 0.38
Ltd
* The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
APRIL-JUNE STOCK PERFORMANCE
— All data from LSEG
— $1 = 83.6817 Indian rupees
(Reporting by Ashish Chandra in Bengaluru)
