SRF Ltd’s shares fell 8% in the past two trading sessions as weaker-than-anticipated December quarter (Q3FY26) results triggered earnings downgrades by various brokerages.
Consolidated revenue at ₹3,713 crore missed consensus estimate of ₹3,800 crore. Ebitda at ₹780 crore was much lower than the consensus estimate of ₹820 crore.
The problem is that SRF’s chemicals business (49% of Q3 revenue mix) has been a story of two halves lately. The chemicals business comprises fluorochemicals and specialty chemicals. Fluorochemicals delivered a solid performance in Q3 with higher realizations and increased volumes of hydrofluorocarbon (HFC) refrigerants. The outlook is upbeat as global HFC prices have been firm; the management is also seeing recovery in domestic demand after a weak first half (H1FY26) due to prolonged monsoons.
On the other hand, specialty chemicals remained a drag as growth was marred by aggressive Chinese pricing, which led to increased margin pressure and deferred offtake by key customers.
SRF expects the specialty chemicals business to be relatively better in Q4, led by strong volume-led recovery, aided by pent-up demand.
It also expects raw material prices to be softer. That said, the management indicated that it may not be able to meet its earlier 20% specialty chemicals sales growth guidance for FY26. This seems to have spooked investors.
After all, specialty chemicals share in chemical business revenue mix was 57% in FY26 and is estimated to be at 56% in FY26, as per JM Financial Institutional Securities.
A concern is that one quarter of bounce-back in the specialty chemicals business may not substantially alter earnings growth expectations, and sustainable recovery signals are still not visible.
This is even as SRF could benefit from tailwinds in the refrigerant gas business. “While it is conceivable that deferred volumes shall bunch up in Q4, the overall transitory pressures in agrochemicals compel us to temper growth estimates in specialty chemicals from 25% to 15% in FY27,” said Nuvama Research report dated 20 January.
It has trimmed FY27 estimates in SRF’s speciality chemicals, prompting 10.7% and 14.3% earnings cuts in the company’s FY27 and FY28 estimated earnings per share, respectively.
Global research firm Citi sees downside risk to consensus expectation of 32% and 19% Ebitda growth in FY26 and FY27. This is because of a high base heading into Q4FY26, continued pricing pressure from low-cost Chinese competition and some deferral of procurement by agro-chemicals majors seen so far and R32 capacity additions by multiple players expected in 2026. R32 gas is a type of refrigerant used in modern air conditioning and heat pump systems
Meanwhile, in the packaging films segment SRF’s volumes fell in Q3FY26. Product pricing was rangebound amid Chinese dumping. Domestic demand was impacted by GST rate rationalization-led disruption.
In the technical textiles segment, SRF is facing pressure in belting fabrics owing to cheaper imports from China and lower exports to the US amid tariffs.
SRF continues to focus on new launches and capacity additions for its chemicals business. Besides, it has been looking to maximize HFC production. It is ramping up polytetrafluoroethylene capacity and expects ramp-up from Q1FY27 onward.
In the speciality chemicals business, the launch of new pharma intermediates and agro-active ingredients is expected to fuel growth.
Last quarter, SRF announced it would set up a new pharma intermediates plant at Dahej, which is expected to be commissioned by September 2026.
Overall, the capital expenditure guidance for FY26-27 was retained at ₹2,000-2,300 crore. But the benefits of additional capacity will accrue gradually, and near-term hinges on the specialty chemicals business.
