SRF Ltd Quarterly Results Q4FY26 stock analysis

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Sector Outlook: Neutral

Chemicals and Performance films recovery support earnings momentum

The company reported revenue of Rs. 4,615 crores, up 7.0% YoY / up 24.3% QoQ, supported by broad-based improvement across its Chemicals and Performance Films businesses despite a challenging global macro environment. During the quarter, the Specialty Chemicals business highlighted continued pricing pressure from aggressive Chinese participation across the agrochemical and intermediate value chains. However, focused cost optimization initiatives and technological interventions helped sustain market share and profitability. EBITDA increased 7.1% YoY / up 31.5% QoQ to Rs. 1026 crores, while EBITDA margin stood at 22.2% (up 3bps YoY / up 121bps QoQ) in Q4FY26. Profit after Tax stood at Rs. 582 crores (up 10.6% YoY / up 34.4% QoQ) in Q4FY26, above our expectations of Rs. 480 crores. The PAT margin was 12.6% compared to 11.7% in the previous quarter. The company also announced significant capex expansion plans for Fluorochemicals, underscoring confidence in long-term industry demand. SRF will now invest approximately Rs. 2,300 crores at its new site in Odisha over the next two years for fourth-generation gas capacity of 20,000 MTPA, backward integration into 30,000 tons of hydrofluoric acid, and downstream HF derivative capacities.

Valuation and Outlook

SRF delivered a strong earnings recovery in FY26, driven by improved profitability across the Chemicals and Performance Films businesses, supported by better realizations, operating leverage, favorable product mix and continued cost optimization initiatives. The Fluorochemicals segment remained the key growth driver, with healthy demand for HFCs, stable performance in industrial chemicals, and a gradual PTFE ramp-up supporting margin expansion. Recovery in packaging film spreads, improved export mix in Aluminium Foil, and increased contribution from value-added products further aided consolidated profitability. As we advance, management commentary indicates improving medium-term demand visibility across specialty chemicals, fluorochemicals, and advanced materials, despite persistent pricing pressure from Chinese competition and geopolitical uncertainties. The company remains focused on technology-led cost efficiencies, high-value product expansion, and strengthening its specialty chemicals pipeline across the agrochemical and pharmaceutical segments. Large capex in HFOs, HF derivatives and downstream fluorochemicals reinforces confidence in long-term structural growth opportunities. Within Performance Films, management believes the industry cycle has largely bottomed out, with increasing contribution from value-added and technical films expected to support profitability recovery. Technical Textiles is also expected to witness steady improvement supported by automotive and infrastructure-linked demand recovery. Overall, SRF remains well positioned to deliver sustained earnings growth over the medium term, backed by its diversified business model, strong R&D capabilities, improving balance sheet profile and strategic focus on specialty and high-margin businesses. Thus, we expect SRF to generate stable revenues over the long term and is trading at a PE of 36.4x/30.1x on FY27e/28e EPS estimates. We value the company at 42x FY27e EPS and have revised the target price of SRF to Rs 3,207 (implying an upside of 16%).

Key concall Highlights

Specialty Chemicals Business:

The Specialty Chemicals business continues to operate in a challenging global environment marked by persistent pricing pressure and aggressive competition from Chinese players, particularly across agrochemical intermediates and fluorinated value chains. Despite this, the company reported buoyant operational performance, supported by strong customer engagement, technology-led cost optimization, and an increasing focus on complex, high-value molecules. Management indicated that enquiry levels across both agrochemical and pharmaceutical segments remain healthy, while customer interactions and project discussions with global innovators continue to progress steadily. While near-term growth may remain moderate due to geopolitical uncertainty and global oversupply, management remains constructive on the long-term outlook.

Fluorochemicals Business:

The Fluorochemicals segment remains the key growth and profitability driver, supported by healthy demand conditions across refrigerant gases, industrial chemicals and fluoropolymer products. The company reported strong performance in HFCs driven by stable domestic demand, improving export realizations and continued growth in automotive air-conditioning applications. Management indicated that global demand-supply dynamics for refrigerant gases remain balanced, which supported pricing stability during the quarter. Industrial Chemicals also delivered steady growth, aided by stable utilization and improved operational efficiency. Management also reiterated its strategic focus on expanding its fluorine chemistry platform through investments in high-growth and next-generation products.

Performance Films & Foil Business Outlook:

The Performance Films & Foil business is witnessing a gradual recovery from the prolonged industry downturn, supported by improving BOPET and BOPP spreads driven by better demand-supply dynamics, operational efficiencies, and stabilization in raw material costs. Management believes the worst phase of margin compression is largely behind, although pricing pressure from aggressive Chinese exports, particularly in European markets, remains a near-term challenge. As we advance, management expects gradual improvement in profitability, supported by higher utilization levels, a better product mix, and increasing contribution from value-added and speciality film products.

Technical Textiles Business Outlook:

The Technical Textiles segment is gradually improving after facing demand weakness and pricing pressure over the last few quarters. The company noted early signs of recovery across key end-user industries, particularly in automotive and infrastructure-related segments, which are expected to support volume growth as we move forward. Demand for Nylon Tyre Cord Fabric remained stable during the quarter, aided by continued growth in passenger and commercial vehicles, while Polyester Industrial Yarn also saw improving traction in infrastructure and industrial applications.

Capex Plan:

The company approved an investment enhancement at its Odisha facility of nearly Rs. 2,300 crores, including the development of a 20,000 MTPA HFO plant, a new 30,000 MTPA HF facility, and downstream HF derivative capacities. In addition, SRF approved a debottlenecking capex of around Rs. 88 crores at its Dahej facility to expand HFC capacity beyond 65,000 MTPA, reflecting confidence in sustained demand for refrigerant gases in both domestic and export markets.

Other Key Highlights:

Trial runs of the Kapla plant (capacitor-grade BOPP films) have commenced and are expected to be capitalized shortly; the BOPP-BOPET line remains on track and is expected to commence production in July.
The aluminium foil plant ramp-up has gathered pace with a sharper focus on exports to Europe and the US; progress on approvals for high-end applications, including aseptic cartons, is underway.