MOSL: SRF (Buy)-A comeback candidate-All moving parts to work in unison to drive accelerated growth
SRF: A comeback candidate; All moving parts to work in unison to drive accelerated growth
(SRF IN, Mkt Cap USD1.4b, CMP INR1775, TP INR2271, 28% Upside, Buy)
- In the past fiscal year, SRF confronted sizeable challenges in its key business lines of Technical Textiles (muted revenue growth of 3.5% – led by subdued growth in NTCF), Chemicals (margins down 280bp – dragged by Specialty Chemicals, especially Agrochemicals) and Packaging (margins down 140bp – led by higher raw material prices and oversupply in BOPP business).
- However, in FY19, we expect all the moving parts to work in unison to drive accelerated growth for SRF.
- In our view, favorable sowing conditions, a decline in closing stocks of key crops and a run-up in global commodity prices are expected to drive a turnaround in Specialty Chemicals business.
- Biaxially-oriented polyethylene terephthalate (BoPET) business is enjoying favorable demand-supply dynamics, with most markets facing supply shortage are inclined to pay premiums. This should more than offset the pressure in biaxially oriented polypropylene (BOPP) business.
- Nylon tyre cord fabrics (NTCF) business also appears well poised for a comeback, given the better demand outlook from OEMs and the replacement market.
SRF three main lines of business are industrial synthetics, industrial fabrics, and chemicals. Industrial synthetics business includes nylon industrial yarn and nylon tyre cord fabric. Industrial fabrics business includes belting fabrics and coated fabrics. Chemicals business includes fluorochemicals and chloromethanes. Through its subsidiaries, Co. manufactures synthetic cords and industrial fabrics, trading in certain specified items in the Jebel Ali Free Zone, Dubai. In addition, Co.'s subsidiaries are engaged in investment holding and in the marketing of imports to the U.S.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.