After a weak June quarter, recovery to be gradual for SRF
₹3,338 crore, fell by 14% from a year earlier, while Ebitda fell 30% to ₹696 crore. The firm’s mainstay chemicals business, which contributed 50% of FY23 revenue, saw an Ebit margin contraction of 750 basis points sequentially to 27.7%. The management said, within chemicals, fluorochemicals was impacted both in terms of volumes and price.
Volume was impacted due to mild summers in India, leading to sluggish demand for refrigerant gases. Prices fell primarily due to China dumping products in key geographies. Further, stagnant pharmaceuticals and agrochemical industries adversely impacted the demand for some industrial chemicals.
Besides, the specialty chemicals business performed well despite muted global demand amid an inventory rationalization. But evidently this was not enough to support overall revenue performance. The management expects inventory rationalization to continue for a few more quarters.
So, the specialty business growth trends must be tracked, going ahead. SRF’s other two segments continued to face headwinds. Its packaging film business saw a steep 83% fall in Ebit, primarily due to a cyclical downturn driven by industry over-capacity.
Rohan Gupta, director, Nuvama Institutional Equities, said: “Packaging film business is expected to remain weak for next 3-4 quarters due to unfavourable market condition and continuous margin pressure. Overall, we have cut SRF’s FY24 earnings estimates by 12-15% because of the weakness in this segment." Meanwhile, its technical textiles vertical saw pressure in volume of flagship products, nylon tyre cord fabric, due to the low prices of caprolactum, a compound used in synthetic fabric. However, it is encouraging that SRF’s capital expenditure plan is on track.
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