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On Wednesday, UBS maintained a Sell rating on SRF (NSE:SRFL) Ltd (SRF:IN) shares while increasing the price target from INR2,050.00 to INR2,200.00. The adjustment follows SRF’s Chemicals segment reporting a robust revenue growth of approximately 30% year-over-year, which was bolstered by an uptick in demand and seasonality in the specialty chemicals space, as well as strong demand combined with favorable refrigerant prices.
The company has shown a positive shift after a 7% year-over-year growth in the previous quarter, which had come after six consecutive quarters of decline. UBS analysts noted the initial signs of recovery in the agricultural chemicals sector but expressed a cautious outlook due to potential continued pricing pressure and demand volatility in the face of an uncertain global environment.
The Performance film and foil business of SRF also saw an improvement in margins sequentially, aided by a narrowing demand-supply gap in BOPET/BOPP markets. However, some products in the technical textiles division are facing increased competition and pricing pressure, which is affecting growth and margins. This trend is expected to persist in the near term.
SRF’s stock price has witnessed a significant increase of about 34% over the past six months. UBS suggests that the market is currently optimistic regarding the potential for a continued strong demand revival. Nevertheless, the firm awaits further information to better understand the sustainability of the current trend in SRF’s business segments.
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