Indian chemicals maker SRF misses Q2 profit view on weak demand, higher costs

SRF

22/10/2024 11:24

Oct 22 (Reuters) - Indian chemicals and polymers maker SRF  SRFL.NS  posted a
steeper-than-expected drop in its second-quarter profit on Tuesday, hurt by sustained weak demand
in its mainstay chemicals business and higher costs. 
    SRF reported a consolidated net profit after tax of 2.01 billion rupees ($23.9 million) for
the quarter ended Sept. 30, down 33% from last year, in its seventh straight quarterly profit
drop. Analysts were expecting a profit of 2.93 billion rupees, according to data compiled by LSEG.
    The company's chemical business unit, which consists of specialty chemicals, fluorochemicals,
and agrochemicals among others, contributes nearly 40% to its revenue and fell 5% in the quarter.
    Total revenue grew 7.8% to 34.24 billion rupees, while total expenses jumped 13.7%, led by an
increase in the cost of raw materials.
    For further earnings highlights, click  urn:newsml:reuters.com:*:nFWN3LX1G5
    
    
KEY CONTEXT
    The chemicals industry has been grappling with high inventory and destocking for the past few
quarters, putting continuous pressure on their margins, according to analysts.
    Jefferies analysts in a pre-earnings note called Q2 a "challenging quarter" for Indian
chemical firms, saying crop protection demand remained weak in the quarter due to continuous
destocking in Asia, the EMEA region, and parts of Latin America.
    Refrigerant gas prices remained weak as export prices of hydrofluorocarbon (HFCs) from India
were down 35% year-over-year in July, the brokerage added, citing trade data. SRF's
fluorochemicals business, which is part of the chemical business unit, includes refrigerants, and
industrial chemicals.
    

PEER COMPARISON    

                             Valuation (next  Estimates (next   Analysts' sentiment          
                               12 months)        12 months)                                  
                  RIC        PE      EV/EBIT  Revenue  Profit   Mean     No of     Stock to  Div
                                     DA       growth   growth   rating*  analysts  price     yield
                                                                                   target**  (%)
 SRF               SRFL.NS    36.66    20.51   14.82    27.74   Hold           26    1.00     0.31
 Coromandel        CORF.NS    23.62    15.38   6.24     15.27   Buy             9    0.90     0.37
 International                                                                               
 Deepak            DPFE.NS    15.84     8.98   NULL     33.26   Buy             1    0.91     0.83
 Fertilisers and                                                                             
 Petrochemicals                                                                              
 Corp                                                                                        
 PI Industries     PIIL.NS    37.09    25.54   15.30    9.94    Buy            24    0.96     0.33
    
* The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong
Sell
** The ratio of the stock's last close to analysts' mean price target; a ratio above 1 means the
stock is trading above the PT

JULY-SEPTEMBER STOCK PERFORMANCE
    

-- All data from LSEG IBES     
-- $1 = 84.0480 Indian rupees          
        


    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SRF Sept Qtr 2024 vs Peers    https://tmsnrt.rs/3UjLPbc
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Ashish Chandra in Bengaluru; Editing by Abinaya Vijayaraghavan)
 ((ashish.chandra@thomsonreuters.com; +91 7982114624;))