Prabhudas Lilladher Sees SRF Target at Rs 2579 Following Reduced Earnings Projections

SRF Faces Pricing Pressure and Demand Uncertainty

Prabhudas Lilladher has downgraded its rating on SRF to 'REDUCE' due to ongoing challenges in the specialty chemical portfolio. The company reported consolidated revenue of Rs46 billion in Q4FY26, marking a 7% year-over-year growth and a 24.3% quarter-over-quarter increase.

Key Segment Performance

The Chemicals segment remained the primary growth driver, delivering a strong 34% quarter-over-quarter increase (+4% year-over-year). Within this, the Fluorochemicals business witnessed robust performance, driven by higher volumes and improved realizations. However, pricing pressure across the specialty chemicals portfolio persists. The Performance Films & Foil segment also posted a healthy growth of 13% year-over-year and 19% quarter-over-quarter, with margins expanding by 250bps sequentially, supported by China's anti-involution measures. The aluminum foil business saw a pickup in exports during the quarter and is expected to further ramp up, backed by customer approvals.

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Recovery Signs in Technical Textiles

The Technical Textiles segment, which remained under pressure through most of the year, is now showing early signs of recovery. EBIT margins improved by 360bps quarter-over-quarter. On the capex front, the company has revised its HFO investment upward from INR11 billion to INR22.9 billion and is also undertaking debottlenecking of its HFC capacity, taking total capacity to ~65,000mtpa.

Ongoing Challenges and Outlook

While the company continues to benefit from current strong realizations in the refrigerants segment, subdued demand in agrochemicals and persistent oversupply from Chinese players remain key concerns. We maintain a cautious stance on the stock and downgrade to REDUCE rating, with an SOTP-based target price of INR2,579.

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Note: The table highlights the key segment performance of SRF in Q4FY26. The Chemicals segment witnessed a significant quarter-over-quarter growth, while the Performance Films & Foil segment posted a healthy year-over-year growth. The Technical Textiles segment is showing signs of recovery with improving EBIT margins.