Target: ₹3,000

CMP: ₹2,573.10

Investors have always been worried over how long high refrigerant gas prices will sustain. In that context, if the current price trend continues till end-FY23, our calculations indicate refrigerant gas will contribute over 60 per cent to SRF’s chemicals EBIT in FY23 (compared to ~47-48 per cent during FY21-22).

In that case, our FY23E chemicals EBIT assumption could also be revised upwards, by ~10-15%. Since refrigerant gas production is energy intensive, we believe prices will remain high in the near term. And, we had highlighted in our previous report (click here) how, in the long run, demand-supply mismatch will keep refrigerant gas prices high.

Even if refrigerant gas price falls by 20-30 per cent in FY24, SRF’s chemicals EBIT could show about 8-10 per cent growth in FY24 (on a revised FY23E base) assuming a) strong growth from specialty chemicals, b) additional HFC volumes coming in from Sep’23, and c) ramp-up of PTFE.

We continue to be positive on the long-term opportunities for SRF and maintain Buy with an unchanged Sep’23 TP of ₹3,000/share (SOTP based)