SRF Ltd is upbeat on the growth prospects of its chemicals business in FY26, which comprises fluorochemicals and specialty chemicals products. The confidence stems from the segment’s robust performance in the June quarter (Q1FY26), where revenue grew around 24% year-on-year to ₹1,839 crore and Ebit (earnings before interest and tax) margin expanded by over 600 basis points year-on-year to 27.3%.
Capacity utilisation improved, led by a demand uptick for key agrochemical intermediates and a higher pricing for the refrigerant gas business. Growth in the fluorochemical business was led by an increase in export volumes while the domestic demand remained weak.
Nonetheless, SRF is positive about the growth of the chemicals business due to ramp-ups in recently commissioned plants, newly launched products, and volume recovery in key products. It eyes revenue growth of 20% for the chemicals business in FY26.
“We expect specialty chemicals to pick up further owing to commercialisation of new products, more so during the seasonally strong H2FY26,” said JM Financial Institutional Securities Ltd report on 24 July.
The brokerage believes that SRF will continue to be able to capitalise on the refrigerant gas demand-supply mismatch and still has headroom to increase R32 volume. R32, or HFC 32, also known as difluoromethane, is a refrigerant used in air conditioning and refrigeration systems.
According to SRF’s management, the global demand for refrigerant gases remained stable due to a tightening demand-supply balance in China.
Currently, the company is running at full utilization of R32 capacity and expects to maintain the same in FY26. R32 prices are currently strong and will continue to remain so ahead, the management added.
In line with the improving outlook, SRF’s capex intensity has bounced back. It has planned a capex of ₹2,400-2,500 crore for FY26 versus around ₹1,100 crore incurred in FY25 when demand conditions were challenging.
The increase in capex is attributed to a gradual improvement in demand sentiments. SRF is planning ₹250 crore capex for a dedicated 12,000 mtpa facility for an agro intermediate at Dahej. Also, the board has approved ₹490 crore capex for a new BOPP (biaxially-oriented polypropylene) film capacity in Indore; the project is set to be completed in two years. Currently, the company’s net debt stands at ₹3,400 crore and is expected to largely remain at this level, as per the management.
Among other businesses, performance films and foil business saw 6% year-on-year revenue growth in Q1FY26. The domestic BOPP demand is likely to remain favourable, owing to supply constraints, which have led to price increases of BOPP films.
BOPP film is a type of plastic film used in the packaging, labelling, and laminating. This situation will persist in the medium term, following the recent fire incident at a competitor’s plant.
Technical textiles vertical was a drag with revenue declining by 11% primarily led by lower Nylon Tyre Cord Fabric volumes and pricing due to subdued domestic demand. The management expects this segment to continue to face near-term margin pressure. Overall, SRF’s consolidated revenue rose 10.2% to ₹3,819 crore in Q1FY26.
Meanwhile, in this calendar year so far, the SRF stock has rallied by 40%, significantly beating the Nifty50 index. Analysts at PL capital caution of pricing pressure from Chinese competitors remaining a threat for a few products of the company.
“At a valuation of 49x FY27 estimated earnings per share, we maintain ‘hold,’ (rating) on the stock with a target price of ₹3,071, based on a sum-of-the-parts valuation approach,” said PL Capital report on 24 July. SRF’s shares are now trading at ₹3,057 apiece.
