Citi has a “sell” rating on the stock with a target price of ₹2,725 apiece. The stock ended the previous session at ₹3,150.4 apiece.
Citi said SRF’s first quarter
earnings before interest taxes depreciation and amortisation (EBITDA) declined 38% from the previous year and 13% sequentially to ₹830 crore compared to the brokerage’s estimate of ₹750 crore.
Its revenue increased 10% from the last fiscal and 12% from the previous quarter to ₹3,820 crore. Citi had estimated a revenue of ₹3,930 crore in the first quarter.
SRF’s EBITDA margin contracted to 21.7% sequentially from 22.2% but expanded from the previous year’s 17.4%.
The brokerage said the company’s outperformance in comparison to estimates was driven by higher-than-expected revenue in the chemicals segment and higher-than-expected EBIT margin in the packaging films business.
Citi said the stock is trading at 25 times its one-year forward enterprise value/EBITDA, which is close to its peak over the last five years. It is likely factoring upside from higher refrigerant-gas prices, it said.
With continued pricing pressure from low-cost Chinese competition, a gradual demand uptick in the global agrichem market and delayed product launches for innovators, Citi said it thinks there is a downside risk to the consensus expectation of 28% EBITDA CAGR over financial year 2025-2027.
Of the 33 analysts that have coverage on the stock, 15 have a “buy” rating, seven have a “hold” rating and 11 have a “sell” rating.
SRF shares declined 3.6% to hit an intraday low of ₹3,037 apiece on Friday, July 25. The stock was trading 1.76% lower at ₹3,095 apiece at 10 am. It has gained 39.9% this year, so far.
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