Mehabe score: 7 G Factor: 3 Piotski Score: 6 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 6.
Description
Established in 1970, SRF Limited is a chemical based multi-business entity engaged in the manufacturing of industrial and specialty intermediates. The company’s diversified business portfolio covers Fluorochemicals, Specialty Chemicals, Packaging Films, Technical Textiles and Coated and Laminated Fabrics. #
Main Points
Chemicals Business (43% of revenues) #
The chemical business of company comprises of two difference product segments:-
Fluorochemicals – The Fluorochemicals Business (FCB) derives its revenue from the sale of . FCB has its manufacturing operations at Bhiwadi, Rajasthan and Dahej, Gujarat. With the ongoing business enhancement and debottlenecking projects currently underway, the Business is continuing its journey on the growth path.
SRF is the domestic market leader in the refrigerants space. Its market share further increased with the launch of new chemical ‘F 600a’. Its main products in the Chloromethane space are Methylene Chloride, Chloroform and Carbon Tetra Chloride, which are used by the pharma and agrochemical customers.
– The Speciality Chemicals segment focuses on agrochemical and pharmaceutical space. The business had expertise in Fluorination chemistry and is also emerging as a champion in some of the non-fluorinated chemistries. Recently, it launched six new agro intermediaries and three pharma intermediaries for increase in revenues.
The company has an established organization i.e. which has been instrumental in driving the development of new products and process technologies for the Fluorochemicals and Specialty Chemicals Businesses. It has 2 Research & Development centres located in India and has a total of 83 approved global patents till yet. It is the key force driving SRF up in the value chain of agrochemical and pharma intermediates as well as the new generation refrigerants.Site:SRFMain Symbol:SRF
Stock trades at 8956.0, above its 50dma 7595.47. It also trades above its 200dma 6197.58. The stock remains bullish on techicals
The 52 week high is at 9134.95 and the 52week low is at 3993.60
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
– is expected to give good quarter
– has delivered good profit growth of 22.87% CAGR over last 5 years
Weakness
– Stock is trading at 7.74 times its book value
– might be capitalizing the interest cost
Competition
– The industry trades at a mean P/E of 16.5x. SRF trades at the industry’s max P/E of 37.47x. SRF trades at a P/E of 37.5x
– Industry’s mean G-Factor is 5.3 while the mean Piotski score is 7.0. SRF has a G-Factor of 3 and Piotski scoreof 6.
– Average 1 month return for industry is 9.7%. The max 1- month return was given by Vardhman Acrylic: a return of 22.14 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 2699.0 cr compared to Rs 1545.0 cr for period ended Jun 2020, a rise of 74.7%
Operating Profits reported at Rs 672.0 cr for period ended Jun 2021 vis-vis 363.0 for period ended Jun 2020 .
Operating Margins expanded 140.3 bps for period ended Jun 2021 vis-vis Jun 2020 .
The EPS for Jun 2021 was Rs 66.72 compared to Rs 64.3 for previous quarter ended Mar 2021 and Rs 30.81 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 9554.0 cr for period ended TTM vis-vis sales of Rs 8400.0 cr for the period ended Mar 2021, a healthy growth of 12.1%. The 3 year sales cagr stood at 10.4%.
Net Profit reported at Rs 1416.0 cr for period ended TTM vis-vis sales of Rs 1198.0 cr for the period ended Mar 2021, rising 15.4%.
Company recorded a healthy Net Profit CAGR of 30.2% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 1772.0 cr for period ended Mar 2021 vis-vis Rs 1304.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 20.0% compared to 20.0% over the last 3 Years. – The stock has given a return of 119% on a 1 Year basis vis-vis a return of 68% over the last 3 Years. – The compounded sales growth on a TTM bassis is 37% vis-vis a compounded sales growth of 15% over the last 3 Years. – The compounded profit growth on a TTM basis is 41% vis-vis a compounded profit growth of 37% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 18.39% vis-vis 18.43% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 18.94% vis-vis 19.64% for Mar 2021
Conclusion
– has reduced debt.
– is expected to give good quarter
– has delivered good profit growth of 22.87% CAGR over last 5 years – Stock is trading at 7.74 times its book value
– might be capitalizing the interest cost
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 7595.47 and is trading at 8956.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
