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SRF’s FY25 annual report (AR) reflects resilience, innovation, and growth amid a challenging macro environment and uncertainties. Key takeaways: 1) Geographically, the sales mix is tilting toward the domestic business. 2) The balance sheet is strong, with a reasonable debt-equity ratio of ~0.4x (reduced borrowing cost in FY26) which augurs well for the Rs25bn capex planned for FY26. 3) Steady cash generation of ~Rs25bn is backed by a strong OCF/EBITDA ratio of 0.9x, indicating lower working capital required for incremental business. 4) R&D spends remain directed toward Chemical Business (CB) for portfolio expansion. 5) Sustainability (energy-saving, clean energy, wastewater management, recycled RM, etc) remains a cornerstone. The management has guided for +20% revenue growth in CB on capacity utilization and commissioning of the new fluoropolymers plant. The Performance Films & Foils Business (PFB) would see a better utilization for BOPET in India; BOPP to face oversupply due to new lines added. We retain ADD on the stock. Business outlook points to growth The mgmt expects FY26 to be better than FY25, led by growth in CB from maximum utilization of refrigerant gas capacities (the Middle East to do well; US to remain subdued), commissioning of the new specialty fluoropolymers plant, and a ramp-up in the new dedicated facility commissioned in Dahej. PFB to focus on increasing sales of high-impact products across BOPP and BOPET, with commissioning of new downstream assets including new offline coating machines in India and metallizers in Thailand and India. The Technical Textiles Business (TTB) is expected to perform better in FY26, owing to higher capacity utilization, cost-optimization steps, and premium and value-added products (VAPs). Reinvested OCF toward capex and debt repayment in FY25 SRF’s healthy operating performance led to a significant improvement in OCF generation (+19% YoY to Rs24.9bn in FY25 vs Rs20.9bn in FY24); OCF/EBITDA improved to 0.9x in FY25 (vs 0.8x YoY) on working capital efficiency. Such a strong OCF generation offers comfort to restart the mgmt’s aggressive capex plan of Rs25bn annually over the next couple of years (Rs12bn spent in FY25). Most of the FY25 capex was directed toward the CB (Rs7bn for debottlenecking and expansion projects). The mgmt guided for capex of Rs25bn in FY26, targeting commissioning of the new fluoropolymers project and capacitor grade BOPP Film Line, while working on the 4th gen refrigerants and BOPP-BOPE film line. R&D and ESG go together for sustainable growth SRF’s R&D spends were largely stable at Rs1.5bn YoY (~2.3% of CB revenue), as the R&D team worked on 50 molecules, 35 of which were taken up for scale-up studies and 50% were commercially produced in MPPs in FY25. SRF is seeing promising progress in the pharma sector. SRF undertook several initiatives on the ESG front: 1) implementing energy efficiency (17,395 MwH), 2) reducing water consumption and wastewater management (2mn KL), and 3) sourcing 74.38% of input materials sustainably.

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