SRF Ltd Quarterly Results Q2FY27 stock analysis

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Sector Outlook: Neutral

Strong growth momentum, with margin recovery and capex execution key

SRF reported strong Q2FY27 performance, with consolidated revenue up 34.7% YoY to Rs. 4,904 crores, driven by broad-based growth across its Chemicals, Performance Films & Foils, and Technical Textiles businesses. The Chemicals business grew 25.0% YoY to Rs. 2,079 crores, supported by higher refrigerant gas volumes and improving demand in select end markets. Although Specialty Chemicals continued to face pricing pressure, improving agrochemical demand, progress in customer registrations and a strengthening pharmaceutical intermediates pipeline indicate a gradual recovery. Performance Films & Foils revenue grew 51.0% YoY to Rs. 2,122 crores, supported by robust demand, healthy asset utilization and increasing contributions from value-added products, while Technical Textiles revenue rose 25.0% YoY to Rs. 594 crores, aided by export growth, customer additions and improving traction in higher-value applications. EBITDA increased 22.2% YoY to Rs. 946 crores, while EBITDA margin contracted 198 bps YoY to 19.3%, reflecting pricing pressure and elevated input and freight costs, particularly in Specialty Chemicals, partly offset by higher volumes and operational efficiencies. PAT rose 31.2% YoY to Rs. 509 crores; however, PAT margin declined to 10.4% from 15.1% in Q1FY27. Management reiterated its FY27 Chemicals revenue growth guidance of 15–20% and expects to achieve the higher end of the range, supported by an anticipated recovery in Specialty Chemicals in H2FY27. Separately, SRF approved an investment of approximately Rs. 600 crores to establish a 12,000 MTPA aluminium foil facility at Jaitapur, Madhya Pradesh, targeting lithium-ion and sodium-ion battery applications as well as high-end packaging. The project is expected to strengthen the company’s presence in the energy storage value chain, complementing its ongoing investments in refrigerants, fluoropolymers and specialty films.

Valuation and Outlook

SRF’s operating outlook remains positive, supported by robust refrigerant demand, an anticipated recovery in Specialty Chemicals and a rising contribution from value-added products. The Chemicals business is expected to remain a key growth driver, with management reiterating its FY27 revenue growth guidance of 15-20% and expecting performance toward the higher end, supported by a stronger Specialty Chemicals recovery in H2FY27. Refrigerant gases should benefit from firm pricing and healthy capacity utilization, while the gradual commercialization of high-value fluoropolymers and next-generation refrigerants offers medium-term growth opportunities. Specialty Chemicals is showing early signs of recovery, supported by improving agrochemical demand, customer registrations, and pharmaceutical molecule approvals; however, sustained profitability improvement will depend on volume ramp-up, product mix, and the ability to pass on higher raw material and logistics costs. Performance Films & Foils is expected to benefit from healthy utilization and increasing contributions from value-added films, capacitor-grade products and higher-value aluminium foil applications. Key monitorables include the pace of Specialty Chemicals recovery, cost pass-through, margin improvement, and execution and commercialization of ongoing growth projects. Thus, we expect SRF to generate stable long-term revenues, and it is trading at a PE of 30.3x/25.6x on FY27e/28e EPS estimates. We value the company at 35x FY27e EPS and have revised the target price of SRF to Rs 2,688 (implying an upside of 15%)

Key concall Highlights

Specialty Chemicals Business:

The Specialty Chemicals business continued to face pricing pressure amid excess industry capacity; however, improving agrochemical demand, progress in customer registrations and a strengthening pharmaceutical intermediates pipeline indicate a gradual recovery. Management expects stronger revenue growth in H2FY27, primarily driven by higher volumes, while margin recovery will depend on cost pass-through and product mix.

Fluorochemicals Business:

Fluorochemicals Business performance remained strong, supported by robust refrigerant demand, higher HFC volumes, firm realizations and geographic diversification. SRF is prioritizing high utilization of existing HFC capacity, while the HFO project at Gopalpur is targeted for commissioning in Q4FY28. Commercial ramp-up will depend on plant stabilization and customer adoption.

Performance Films & Foil Business Outlook:

Performance Films & Foils delivered strong revenue growth, supported by strong demand, healthy utilization, and value-added products. Capacitor-grade films are gaining traction, while commercial sales of capacitor aluminium foil and the hybrid BOPP/BOPPE line are expected in Q3FY27. Q2 performance was more normalized than Q1, with limited expectations of recurring inventory-related benefits.

Technical Textiles Business Outlook:

Technical textiles revenue increased 25.0% YoY to Rs. 594 crores, supported by export growth, customer additions and improving traction in nylon 66 and polyester tyre cord fabrics. Additional dipping capacity is expected to support product mix and utilization.

Aluminium Foil Expansion:

SRF approved an investment of approximately Rs. 600 crores for a 12,000 MTPA aluminium foil facility at Jaitapur, targeting battery applications and high-end packaging. Phase I entails Rs. 300 crores, with completion expected within approximately 23 months of Board approval.

R&D and New-Age Opportunities:

SRF’s R&D capabilities and patent portfolio support expansion into energy storage, electronics, semiconductors, advanced cooling and sustainable materials. While several products are progressing through development and customer qualification, commercialization timelines remain gradual. Management cited an aggregate opportunity of approximately US$1 billion across new-product initiatives, which should not be interpreted as near-term revenue guidance.

Capex and Project Execution:

The company’s capex focuses on expanding its HFO and fluoropolymer capacities, enhancing HFC production, establishing a new aluminium foil facility and commercializing value-added films. These projects are expected to strengthen the product mix and support long-term growth.

Other Key Highlights:

Refrigerant demand and pricing are expected to remain broadly stable, supported by high capacity utilization and geographic diversification, although elevated freight and input costs remain margin headwinds.
Management expects the existing aluminium foil business to potentially exit FY27 profitably, supported by higher-grade products and operational scale-up.
Increasing contributions from value-added products, established Western-market relationships and new applications are expected to maintain business resilience and reduce dependence on individual markets.