SRF Ltd Quarterly Results Q1FY27 stock analysis

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Sector Outlook: Neutral

Strong quarter offset by normalization concerns and gradual Specialty Chemicals recovery

SRF reported a healthy start to FY27 with consolidated revenue increasing 31.8% YoY to Rs. 5,033 crores, driven by robust growth across the Chemicals, Performance Films & Foil and Technical Textiles businesses. The Chemicals business benefited from healthy demand for refrigerant gases and improved export realizations. It continued ramp-up in fluoropolymers, while the Performance Films & Foil business delivered its highest-ever quarterly performance, supported by supply disruptions, an improved pricing environment, and a richer product mix. EBITDA increased 49.0% YoY to Rs. 1,237 crores, with EBITDA margin expanding 284 bps YoY to 24.6%, reflecting strong operating leverage and favourable business mix. Profit after Tax rose 75.5% YoY to Rs. 759 crores, significantly ahead of our expectations, with PAT margin improving to 15.1% from 11.3% in Q1FY26. During the quarter, the Board also approved a Rs. 250 crore capex for setting up a BOPET Thick Film Line in India, further strengthening its value-added films portfolio, while the previously announced fluorochemical expansion projects in Odisha continue to progress as planned.

Valuation and Outlook

SRF has commenced FY27 on a strong note, delivering broad-based earnings growth led by the Fluorochemicals and Performance Films businesses, while Specialty Chemicals is showing early signs of recovery. The Fluorochemicals segment continues to anchor earnings, supported by healthy refrigerant demand, full utilization of HFC capacity, and a gradual ramp-up in PTFE. Management continues to target 15-20% growth in the Chemicals business for FY27, driven by stable refrigerant markets, an expanding pharma pipeline and a gradual recovery in agrochemical demand. While pricing pressure from Chinese competitors persists, technology-led cost optimization and new product development are expected to support medium-term growth. Performance Films is likely to witness sequential normalization following an exceptionally strong Q1; however, increasing contribution from value-added products, aluminium foil exports and specialty film capacities should support long-term profitability. Technical Textiles is also expected to sustain steady growth, supported by improving demand across automotive, industrial and export markets. Overall, SRF remains well-positioned to deliver healthy long-term earnings growth, backed by its integrated fluorochemical platform, diversified portfolio, strong R&D capabilities, and ongoing investments in high-value specialty businesses. Thus, we expect SRF to generate stable revenues over the long term and is trading at a PE of 35.7x/30.3x on FY27e/28e EPS estimates. We value the company at 41x FY26e EPS and have revised the target price of SRF to Rs 3,013 (implying an upside of 15%).

Key concall Highlights

Specialty Chemicals Business:

The Specialty Chemicals business continues to face pricing pressure from aggressive Chinese competition across agrochemical and pharmaceutical value chains. However, early signs of recovery are emerging in agrochemical demand, while customer engagements and the pipeline of pharma molecules continue to strengthen. Technology-led cost optimization has helped protect market share, and management expects the Chemicals business to grow by 15–20% in FY27, supported by new product The Fluorochemicals business delivedevelopment and a gradual recovery in demand.

Fluorochemicals Business:

red another strong quarter, driven by robust domestic and export demand for refrigerant gases, full utilization of HFC capacity, and an improving PTFE ramp-up. Higher realizations offset raw material cost inflation, while the PVDF project remains on track for commissioning in Q2FY27. Management expects stable global refrigerant demand and pricing, with fluoropolymers expected to contribute meaningfully from FY28-FY29.

Performance Films & Foil Business Outlook:

Performance Films & Foil reported a record quarter, supported by favourable pricing, temporary supply disruptions and an improved product mix. While management expects profitability to normalize sequentially, the medium-term recovery remains intact, supported by higher contributions from value-added products, capacitor-grade BOPP films, aluminium foil exports, and specialty film capacities. The newly approved Rs.250 crore BOPET Thick Film Line further strengthens the company’s premium product portfolio.

Technical Textiles Business Outlook:

Technical Textiles delivered healthy growth, aided by improving domestic demand, robust exports and temporary inventory gains. While margins are expected to normalize, demand remains favourable across automotive, industrial and export markets. The commissioning of the new dipping line is expected to improve market share and support future growth in tyre cord fabric applications.

Capex Plan:

The Rs. 2,300 crore fluorochemical expansion project in Odisha is progressing as planned, with regulatory approvals on schedule. In addition, the company approved a Rs.250 crore investment in a BOPET Thick Film Line to expand its presence in high-value specialty films. Ongoing investments across PTFE, PVDF and other fluoropolymer projects are expected to strengthen SRF’s long-term growth trajectory.

Other Key Highlights:

New pharmaceutical molecules continue to receive encouraging customer acceptance, with larger commercial opportunities expected over the medium term.
Customer approvals for capacitor-grade BOPP films are progressing well, with commercialization expected later in FY27.
Aluminium Foil exports continue to expand into Europe and the US, while approvals for higher-value aseptic packaging applications are progressing steadily.