Indian stock market has thrown several gems which helped investors in achieving their financial freedom. Chemical firm SRF is one of them. Shares of the company have soared 5,805 per cent in the past 10 years. The scrip jumped to Rs 2,682.05 on September 19, 2022 from Rs 45.42 on September 18, 2012. This means that an investment of Rs 1 lakh in SRF in 2022 would have turned to over Rs 59 lakh at present.
Market watchers maintained their bullish view on SRF despite the outperformance, citing chemicals capital expenditure of Rs 12,000-13,000 crore over the next 5 years, the company’s goal to grow the chemicals business at 20 per cent while maintaining 20 pe cent RoCE and taking the fluoropolymer revenue contribution to $150-200 million over the next 5 years, among others.
Founded in 1970 after being spun out of its parent company DCM, SRF is a diversified chemicals company with interests in manufacturing of refrigerant gases, packaging films, technical textiles, and specialty chemicals. It operates within four businesses: technical textiles (17 per cent of FY22 revenues), chemicals (42 per cent), packaging films (38 per cent), and others (3 per cent).
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Over the years, net sales of the company jumped to Rs 12,312 crore for the year ended March 31, 2022 from Rs 3,980.87 in FY12. Likewise, net profit of SRF grew to Rs 1888.92 crore from Rs 378.82 crore during the same period. This shows an annualised growth of nearly 12 per cent and 18 per cent in the top line and bottom line, respectively, during the past 10 years.
While retaining ‘Buy’ call on SRF with a target price of Rs 3,000, brokerage JM Financial said that the company remains at the forefront of capturing growth in the fluorochemicals space. It believes that SRF may post 19.60 per cent growth in net sales in FY23 with return on equity of 23.40 per cent.
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IIFL Securities is also positive on SRF with a target price of Rs 2,900. “Medium-to-long-term growth prospects are in line with our expectations. Rising capex intensity in chemicals bodes well, since as it would drive overall sales and profitability mix strongly towards chemicals, in the next 5 years, thereby curtailing the overall exposure towards cyclical/volatile businesses like technical and packaging films,” IIFL Securities said in a report.
The brokerage further added that SRF’s deep expertise in fluorine-based chemistries and strong R&D capabilities are expected to be the key levers to expand the high-margin specialty chemicals business going forward.