India`s SRF posts 7% fall in Q4 profit on packaging margin hit
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Indian chemicals and polymers maker SRF Ltd on Tuesday reported a 7.3% fall in fourth-quarter profit, hit by significant pressure on the margins of its packaging film business. Consolidated net profit after tax stood at 5.62 billion rupees ($68.7 million) for the three months ended March 31, compared with 6.06 billion rupees a year earlier, the Gurugram-based company said in an exchange filing. Cost of materials consumed rose 8.8%.
A spike in the prices of polypropylene and polyethylene films used in packaging film pulled the segment's revenue down 17%. The business faced "strong headwinds with significant pressure on margins" after several new lines got operationalized in India and overseas, the company said.
Revenue from sale of products rose 6% to 37.19 billion rupees.
Meanwhile, weak demand crimped sales in the technical textiles segment, which provides reinforcements to nylon and polyester yarns and fabrics. The segment reported a more than 13% fall in revenue due to lower sales of nylon tyre cord fabrics, SRF said.
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WHY IT MATTERS
Slowing demand and macroeconomic headwinds pose major challenges to chemicals companies, which are already contending with rising raw materials costs and shrinking product prices. SRF's revenue grew 2-44% in the last four quarters, while profit climbed between 1% and 59%. Revenue from the chemicals segment, which accounts for more than half of the overall business, grew about 34% to 21.02 billion rupees.
PEERS COMPARISON
Valuation (next Estimates (next 12 Analysts' sentiment
12 months) months)
RIC PE EV/EBIT Revenue Profit Mean # of Stock to Div
DA growth growth rating analysts price target yield
(%)
SRF Ltd 30.56 18.39 15.39 12.83 Buy 25 0.91 0.28
Navin Fluorine 49.16 30.95 35.17 36.64 Buy 17 1.00 0.23
International Ltd
PI Industries Ltd 35.88 25.26 21.40 18.86 Buy 21 0.92 0.17
UPL Ltd 9.58 6.89 8.07 20.27 Strong 0 0.71 1.40
Buy
** The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of stock's last close to analysts' mean price target; a ratio above 1 means the stock is trading above the PT
JAN-MARCH STOCK PERFORMANCE
GRAPHIC: SRF shares vs peers https://fingfx.thomsonreuters.com/gfx/mkt/dwpkdyqlevm/SRF.png
-- All data from Refinitiv
-- $1 = 81.7930 Indian rupees
