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Our View:

SRF’s 3QFY23 Ebitda at Rs 8.3bn (-5% YoY; +8% QoQ), stood in-line with our and street estimates, with broader earning trends in-line with expectations. In the 9M period the operating earnings have grown by 25% YoY, driven by CB segment. Over 3QFY23, CB revenue at Rs 17.6bn registered a growth of 23% YoY, driven by demand traction for both specialty chemicals and fluorochemicals, helping offset 6% YoY lower PFB revenue at Rs 12bn and 21% YoY lower TTB revenue at Rs 4.3bn. While weaker demand for nylon tyre chord fabric impacted TTB revenues; start of new BOPET & BOPP lines in India and globally led to drop in PFB revenues. Continued investment towards capacity addition in CB, along with introduction of new product lines in specialty chemicals and fluoropolymers are likely to maintain earnings growth CAGR of ~ 20% for SRF. Maintain BUY.

Result Highlights

? Revenue: The consolidated net-revenue during the quarter stood at Rs 37.3bn (+31% YoY; -4% QoQ).

? Consolidated Ebitda & PAT: Consolidated Ebitda at Rs 8.3bn(-5%YoY; +8% QoQ). Consol. PAT at Rs 5.1bn (+1% YoY; +6% QoQ); 9MFY23 Ebitda at Rs 26bn stands 25% higher YoY & PAT at Rs 15.9bn(+35% YoY)

? Chemicals Business: Revenue stood h igher by 23% YoY but lower by 4% QoQ at Rs 17.6bn. Ebit stood at Rs 5.64bn (+35% YoY and +9% QoQ); During the quarter, the Specialty Chemicals & Fluorochemical businesses performed exceedingly well on account of strong demand for certain key products, their derivatives and also refrigerants from the overseas as well as domestic markets and higher capacity utilization of dedicated/multipurpose facilities.

? Technical Textile Business: Revenue stood at Rs 4.3bn (-21% YoY; -9% QoQ) and EBIT stood at Rs 342mn (-70% YoY; -46% QoQ). Demand for Nylon Tyre Cord Fabric and Polyester Industrial Yarn remained weak during the quarter.

? Packaging Film Business: Revenue stood at Rs 12bn (-6% YoY; -10% QoQ), ; EBIT stood at Rs 1.2bn (-53% YoY; +17% QoQ;. The Packaging Films Business faced head winds on account of significant supply addition in BOPET and BOPP film segments in India, global demand slowdown and steep energy costs in Europe; Scenario in BOPET is unlikely to change in the short term.

? The SRF Board has approved capex aggregating Rs 7450mn towards a) range of Specialty Fluoropolymers at Dahej (Rs 5950mn), b) dedicated facility for agrochemical intermediate at Dahej (Rs 1100mn) and c) structure for a new plant building (Rs 400mn)

? SRF has also declared a second interim dividend of Rs 3.6/sh in addition to first interim dividend of Rs 3.6/sh.

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