Home » Core Investor Group » SRF Ltd – Q1FY26 Result Update
Sector Outlook: Neutral
Steady start to FY26, despite ongoing global uncertainties
The company reported a revenue increase of 10.2% YoY / down 11.5% QoQ to Rs. 3,819 crores, above our expectations. The Chemicals and Performance Films & Foil Business saw a 24% and 6% annual increase in revenue, respectively, while Technical Textiles saw an 11% decline annually. During the quarter, the Specialty Chemicals business continued to witness a demand uptick for key agrochemical intermediates. Strategic pricing initiatives and solid performance in export markets contributed to the segment’s revenue growth. EBITDA increased 37.5% YoY / down 13.3% QoQ to Rs. 830 crores, while EBITDA margin stood at 21.7% (up 431bps YoY / down 47bps QoQ) in Q1FY26. Profit after Tax stood at Rs. 432 crores (up 71.4% YoY / down 17.8% QoQ) in Q1FY26, above our expectations of Rs. 405 crores. The PAT margin was 11.3% compared to 12.2% in the previous quarter. The company’s board has declared an interim dividend of Rs. 4 per share, with the record date set as Tuesday, July 29. During the quarter, the company also approved the establishment of a dedicated facility at Dahej to produce 12,000 MT per annum of an agrochemical intermediate, with an estimated investment of Rs. 250 crores, aimed at addressing future demand. Despite a subdued summer and ongoing global uncertainties, the company has begun the year on a firm footing. Management remains cautiously optimistic about the outlook for the rest of the year. The company’s robust capital expenditure plans, as reflected in its recent announcements, underscore its continued focus on long-term growth.
Key Concall Highlights
SRF Limited remains well-positioned for continued growth in FY26, particularly in its specialty chemicals business. Following a period of inventory rationalization in FY25, the agrochemical market is showing signs of recovery, though a broad-based revival is still awaited. Revenue growth in Q1FY26 was largely driven by newly launched products, while legacy products also witnessed a rebound in volumes. During the quarter, the company launched a new pharma intermediate and is currently developing multiple active ingredients (AIs), with one AI already registered and expected to scale up through the rest of the year. Despite wider industry concerns around delays in approvals from global innovators, SRF’s order book remains strong, and management maintains a cautiously optimistic outlook for the remainder of the fiscal year.
The fluorochemicals business delivered robust growth despite weak domestic RAC demand, thanks to a surge in HFC export volumes. The recent commercialisation of R4670A, a proprietary low global warming potential (GWP) refrigerant, reinforced SRF’s R&D credentials and leadership in this space. The HF3 plant is steadily ramping up to boost HFC production, while the PTFE segment is also expected to grow through new product introductions. Management anticipates stable to strong pricing in HFCs through FY26, supported by favourable global demand.
The performance films and foil segment is expected to sustain its momentum, backed by improved production efficiencies and higher capacity utilisation. The domestic BOPP market remains favourable due to recent market dynamics, and SRF continues to focus on profitability by commercialising more value-added products and maintaining strict cost controls. The aluminium foil business posted its best-ever quarterly sales, aided by volume growth and anti-dumping duties that have improved domestic competitiveness. While the South Africa and Hungary units performed well, benefiting from stable operations and lower energy costs, the Thailand unit continues to face margin challenges due to elevated input costs and stiff competition from Chinese players.
In the technical textiles business, the domestic market for Nylon Tyre Cord Fabric experienced a downturn in Q1FY26. The belting fabrics segment was impacted by ongoing price pressures from Chinese dumping, although segments like Nylon and Polyester Industrial Yarn saw improved traction in sales.
SRF has laid out a strong capex plan of Rs. 2,400–2,500 crores for FY26. Two major projects have been approved: a 12KTPA agrochemicals intermediate facility at Dahej with an investment of Rs. 250 crores, and a BOPP film capacity expansion at Indore with a capex of Rs. 490 crores, slated for commissioning in H1FY28. These initiatives align with SRF’s long-term strategy to build capacity in high-growth verticals and consolidate its market leadership.
Additionally, the company’s focus on innovation remains a significant strength. SRF’s R&D team of over 400 scientists has secured more than 150 patents and continues to work on advanced chemistries and high-value products, reinforcing its competitive edge across global markets.
Valuation and Outlook
SRF has reported healthy operating performance in Q1FY26, driven by improved performance in the Chemicals and Packaging Films businesses. The company has commenced the year on a strong note, despite facing a subdued summer and persistent global uncertainties. The Chemicals business delivered a healthy performance, aided by a gradual recovery in the agrochemical market post-inventory rationalization, with most of the destocking cycle now behind. Although pricing pressures persist, the company has retained its original growth guidance. The Fluorochemicals segment witnessed healthy growth, aided by increased exports that offset subdued domestic RAC production. In the Packaging Films and Foils business, revenue grew annually, while operating profit saw a significant improvement, driven by record production, higher capacity utilization, and cost efficiencies. The Aluminium Foil division delivered its best-ever quarterly sales, aided by robust volumes and anti-dumping duty tailwinds. The domestic BOPP market is expected to remain tight due to a supply disruption impacting ~25% of local capacity, prompting imports. Overall, the company acknowledges some near-term pressures in this segment but maintains a positive outlook. SRF’s outlook is characterized by strategic capital investments, a focus on high-margin and value-added products, and leveraging its R&D capabilities to drive growth across its diversified business segments, particularly in chemicals and fluorochemicals. The strong Q1FY26 performance and ambitious capital expenditure plans reflect long-term growth visibility. We expect SRF to generate stable revenues over the long term and is trading at a PE of 47.2x/34.3x on FY25e/26e EPS estimates. We value the company at 55x FY26e EPS and have revised the target price to Rs 3,547 (implying an upside of 17%).
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