Financial Results Highlights: SRF Value Research
Gross operating revenue stood at 2699 crores rising 74% YOY from 1545 crores & 3.5% QOQ due to volume growth & higher realizations & renegotiation of terms with long term customers
EBITDA stood at 678 crores rising YOY 77% & QOQ 4.7% due to higher prices of raw materials & export freight rates
EBITDA margin stood at 25% which is almost flat YOY & QOQ
PAT stood at 395 crores rising 123% YOY & 3.6% QOQ
PAT margin stood at 15% rising 3% YOY & was flat QOQ
Business Highlights: SRF Ltd Value Research
Revenue Mix: Chemicals:41.2% Packaging Film:38.5% Technical Textile Business: 2% Others: 18.5%
Chemical’s business grew 58% YOY but declined 3.3% QOQ and stood at 1113.7 crores because of higher sales from exports and domestic markets, increase in raw material prices and export freight rates have impacted Q1 but seems to be a short-term phenomenon as the price rise was due to lockdowns
Packaging Film business grew 53% YOY & 6.3% QOQ and stood at 1041.3 crores
Technical Textiles business showed substantial growth YOY of 251% & 23 QOQ and stood at 492 crores
Other business grew 126% YOY but declined 31%.QOQ and stood at 53.6 crores.
8 new process patents were granted in Q1FY22, taking the tally to 99 global patents to-date. Overall, the Company has applied for 317 patents
Chemical Business: SRF Annual Report
Specialty Chemical Business: SRF Analysis
Growth was supported by improved demand from global markets and increased volumes of key products.
Raw material costs for certain key products witnessed an uptrend, which resulted in dilution of margin. However, management expects these prices to normalize in the coming quarters.
Focus remains on expanding its pharmaceutical product portfolio. Management intends to increase the current 15% contribution of the pharma segment to ~25-30% over the medium term.
SRF has introduced two new products during the quarter.
It has commissioned two dedicated facilities at Dahej for the agrochemical segment.
Fluorochemicals Business segment delivered a robust performance on account of: Higher sales volumes in the refrigerants and the blends segment, especially from the export markets. Healthy contribution also came from the chloromethanes segment but the Domestic market in Q1 witnessed lower offtake induced by localized lockdowns.
The Board has approved projects at Dahej to be implemented in the next 24 months:
Integrated expansion of the Fluorocarbon-based Refrigerant capacity at an investment of ~ Rs. 550 crore
Installation of 200 KV grid at a projected cost of Rs. 135 crore, ensuring availability of stable power for future-readiness
Packaging Film business: SRF Share Analysis
The segment continues to perform well, despite impact of COVID-19 second wave on domestic markets, owing to:
New capacities that came on-stream in Hungary and Thailand
Growing product portfolio with two new products and increasing contribution from value-added products
The surge in export freight rates impacted adversely
Bolstered the segment mantra of ‘Easy to Do Business With’:
Expanded market footprint to more than 100 countries
Continuous improvement in quality and delivery. Wider and deeper penetration with multinational customers
Technical Textile Business: SRF Stock Analysis
The segment reported a significantly improved performance on account of: Improved demand in the Nylon Tyre Cord, Belting Fabrics and Polyester Industrial Yarn segments & Re-structuring of margin profile with long-term customers.
Capex: SRF Technical Analysis
Integrated expansion of fluorocarbon-based refrigerant capacity will be undertaken with an investment of INR550cr and will be completed in 24 months.
The plant will be a swing HFC plant with around 40% captive capacity to manufacture raw materials for fluorocarbon refrigerants.
Remaining 60% capacity will cater to external demand. On an annual basis, the plant would ideally have a capacity of 15,000-16,000MT, which could peak to 20,000MT.
Installation of a 200kV grid worth INR135cr will also be undertaken for availability of uninterrupted power supply.
Capex for FY22 will range at ~INR2,000cr. This will be distributed across segments – CB (INR1,000-1,100cr), PFB (INR400-500cr), other capex budgets (INR200cr) and TTB and others (INR200-300 cr).
The growth plans currently under implementation will need capex of INR800-1,000cr in FY23.
New growth capex will be around INR500-700 cr, resulting in total capex INR1,600-1,800cr for FY23.
Others
Substantial volume increase and higher realizations for several key products supported the company’s strong growth in Q1FY22 in addition to the base effect.
The quarter under review witnessed an impact on logistics cost due to a large increase in export freight charges. These costs are expected to neutralize in the coming quarters.
Laminated fabric business’ performance was in line with expectations and new products are being developed for the domestic market.
Anti-dumping duty on Chinese PVC resin has been extended till Jan’22.
Riots in South Africa led to the shut down of one facility for a few days during the quarter.
Mgt Update
The company has appointed Mr. Prashant Yadav, President & CEO (Fluorochemicals Business) as President & CEO (Fluorochemicals Business & Technical Textiles Business) w.e.f. November 1, 2021 consequent to superannuation of Mr. Sanjay Chatrath President & CEO (Technical Textile Business) on October 31, 2021.
Also The Board took note that Mr. Arun Bharat Ram has expressed his intention to step down as Executive Chairman and Director of the Company from the closing of business hours on March 31, 2022
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