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Stock recommendation: SRF — Buy — Target price Rs 2,200
Publish date: August 9, 2018
Results update: Robust performance
SRF’s robust first quarter performance was largely driven by packaging film business and recovery in the chemicals and polymers segment.
The Gurgaon-based company had a strong operating performance across segments due to strong earnings in the quarter ended June.
Key highlights
- EBITDA expanded by 49% (YoY), while revenues saw a 35% (YoY) jump. EBITDA increased on the back of lower-than-expected employee costs, while the revenue was led by ramp-up of new packaging film facility.
- The company’s packaging film business increased sharply by 52% (YoY) due to optimal utilization of its two facilities — BOPET and BOPP.
- Chemicals revenues grew by 34% (YoY) due to last year’s low base.
- Technical textiles business, however, remained fairly muted at Rs 5 billion.
Valuation & outlook
We believe the company is set to benefit from the gradual recovery in the agro-chemical segment and its expansion plans. We are also confident about the manufacturing company’s packaging business due to improved capacity of its facilities.
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