Brokerages are cautious, but divided on prospects of chemicals conglomerate SRF Ltd., after the company's June quarter results and subsequent subdued commentary from the management regarding the challenging outlook to some of the company's key businesses.
In its earnings call on Tuesday, SRF highlighted that the global agrochemicals inventory destocking coinciding with elevated supplies from China have proven to be a double whammy for the company. It said that it would now revisit growth and margin guidance for the current financial year at the time of its September quarter results.
For its refrigerant gas business, SRF said that it expected the second half of the fiscal to be better for the hydrofluorocarbon (HFC) demand, particularly from the US.
Brokerage firm Jefferies maintained a hold rating on SRF but cut its price target to Rs 2,000. It has cut the growth estimates for the chemicals business for financial year 2024 and 2025 by 9 and 14 percent respectively as well as operating profit or EBITDA estimates for the same period by 19 percent and 17 percent respectively.
Morgan Stanley has downgraded the stock to equalweight and slashed its price target to Rs 2,194 from Rs 2,968 earlier. The firm wrote in its note that the likelihood of investment-led multiple re-ratings for the stock has subsided.
However, Kotak Institutional Equities believes that the cyclical downturn presents a buying opportunities for investors. It has maintained its buy rating on the stock with a price target of Rs 2,730.
Kotak added that though the management has toned down its near-term outlook, it expects steady improvement in the coming quarters. It cut its financial year 2024-2025 earnings per share (EPS) estimates by 18 and 17 percent respectively.
UBS also maintained its ‘Buy’ call on SRF but cut the price target to Rs 2,850 from Rs 3,000 earlier.
The brokerage said that SRF’s chemical business should pick up in the second half of the fiscal, but other businesses are likely to take longer to recover.
On Tuesday, InCred mentioned that SRF's earnings have peaked and proceeded to cut its financial year 2024 and 2025 EPS estimates by 25 percent each.
Shares of SRF are trading 1 percent lower at Rs 2,141.65.
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