The firm wrote in its note that the downgrade is mainly due to its refrigerant gas business. It said that the whole street is giving multiples to the highly cyclical refrigerant gas business and that theories have been abound on how refrigerant prices are structural. The cyclical nature of those were visible in the June quarter results, InCred said.
“The present quarter disappointment was all driven by refrigerant gas -- whose prices are yet to revert to mean,” InCred said in its note. “Added to it will be the impact of the cyclical nature of the agrochemical revenue,” it noted.
InCred said that the high channel inventory in agrochemicals is a key concern for global majors. Hence, it is likely to impact the intermediary business of SRF as well.
SRF’s earnings per share (EPS) of Rs 73 last year was the highest for at least two years. “We estimate that an EPS cut of 25 percent is needed for financial year 2024 and may be 25 percent for financial year 2025 as well,” InCred said.
On Monday, SRF reported a 41 percent decline in its net profit to Rs 359 crore for Q1 FY24 compared with Rs 608 crore reported during the same period last year. The figure was well below the CNBC-TV18 poll of Rs 454 crore.
The company’s revenue of Rs 3,338 crore was also lower than the CNBC-TV18 poll estimate of Rs 3,586 crore, and was down 14.3 percent on a year-on-year basis.
Shares of SRF have recovered from the day's low and are currently trading 0.3 percent higher at Rs 2,151.60.
