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SRF
Consistent build up in operational efficiencies across verticals has enabled
SRF’s market leadership both domestically as well as internationally. With
capex of `13 bn over the last four years and their ongoing capex, SRF is
well positioned to take advantage of the growth coming in from the
automobiles, textiles and mining sectors.
Company Background
SRF is a multi-business entity engaged in the manufacturing of chemical based
industrial intermediates with three main lines of business viz, technical textiles
(54% of FY11 revenues), chemicals and polymers (21% of FY11 revenues) and
packaging films (25% of FY11 revenues). It is world second largest producer of
Nylon 6 tyre cord fabrics and belting fabrics and exports its products to over 60
countries. As part of its growth strategy SRF in the recent past has acquired two
foreign entities, one in Thailand (Thai Baroda Industries Ltd – manufacturers of tyre
cord), and the other one in South Africa (Industex Technical Textiles (Pty) Ltd –
manufacturer of belting fabrics).
Recent Financial Performance
2QFY12 revenues of `9.1bn (22.2% YoY and 9% QoQ growth) were driven by
strong growth in chemicals business revenues (85% YoY and 42% QoQ growth)
which made up 36% of the total revenues but held back by a 24% YoY drop in
packaging film revenues (33% of total revenues). As a result, SRF’s chemicals
business has grown 84% YoY in 1HFY12 although total revenues grew only 28%
YoY due to the 2QFY12 decline in packaging film. Whilst 2QFY12 EBITDA grew
marginally by 2% YoY, PAT declined by `14 crores registering a 12% reduction
impacted by rupee depreciation.
Outlook
Whilst the company has been making investments to augment and upgrade
production facilities mainly in the BOPET film line (packaging), that segment is
witnessing a slowdown since 2QFY12. On the other hand, the chemicals business
accounting for 37% of profits has ensured strong performance by the company.
However, in the recent earnings release, management have highlighted that the
effects of slowdown is likely to adversely impact both volumes and margins of the
chemical segment in the near future.
Conference Meeting Notes
SRF represented by Mr Rajendra Prasad, President & CFO
Analyst:
Dayanand Mittal, dayanandmittal@ambitcapital.com, Tel: +91 22 3043 3202
1. Expansion plans: The Company is looking to de-risk its business model by
diversifying from its TTB (Technical textile business) business as this segment
currently contributes more than 50% of its revenues. The Company is
expanding its chemical complex in Dahej from current capacity of 4,500tons to
~20,000tons at a capex of `8bn and is expected to be operational in next 2-3
years. The company expects to take advantage of the growth coming in from
the automobiles, textiles and mining sectors.
2. Buy back and dividend plans to continue: The Company plans to continue
with its buyback and dividend plan because they are generating significant
cashflows in its existing business and their current capex plans are well funded.
3. No impact from Kyoto protocol extension: The Company doesn’t foresee
any impact from extension of Kyoto Protocol deadline from Dec 2012 to 2017
as UNFCCC doesn’t recognize their methodology of booking Carbon credits;
hence they would not get any extension. Thus SRF will only be able to
monetize the carbon credits earned till Dec 2012 and sold by May 2013. The
company said that it earned carbon credit of `1.8bn during 1HFY12 (reported
PAT for 1HFY12 was `1.9bn).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SRF
Consistent build up in operational efficiencies across verticals has enabled
SRF’s market leadership both domestically as well as internationally. With
capex of `13 bn over the last four years and their ongoing capex, SRF is
well positioned to take advantage of the growth coming in from the
automobiles, textiles and mining sectors.
Company Background
SRF is a multi-business entity engaged in the manufacturing of chemical based
industrial intermediates with three main lines of business viz, technical textiles
(54% of FY11 revenues), chemicals and polymers (21% of FY11 revenues) and
packaging films (25% of FY11 revenues). It is world second largest producer of
Nylon 6 tyre cord fabrics and belting fabrics and exports its products to over 60
countries. As part of its growth strategy SRF in the recent past has acquired two
foreign entities, one in Thailand (Thai Baroda Industries Ltd – manufacturers of tyre
cord), and the other one in South Africa (Industex Technical Textiles (Pty) Ltd –
manufacturer of belting fabrics).
Recent Financial Performance
2QFY12 revenues of `9.1bn (22.2% YoY and 9% QoQ growth) were driven by
strong growth in chemicals business revenues (85% YoY and 42% QoQ growth)
which made up 36% of the total revenues but held back by a 24% YoY drop in
packaging film revenues (33% of total revenues). As a result, SRF’s chemicals
business has grown 84% YoY in 1HFY12 although total revenues grew only 28%
YoY due to the 2QFY12 decline in packaging film. Whilst 2QFY12 EBITDA grew
marginally by 2% YoY, PAT declined by `14 crores registering a 12% reduction
impacted by rupee depreciation.
Outlook
Whilst the company has been making investments to augment and upgrade
production facilities mainly in the BOPET film line (packaging), that segment is
witnessing a slowdown since 2QFY12. On the other hand, the chemicals business
accounting for 37% of profits has ensured strong performance by the company.
However, in the recent earnings release, management have highlighted that the
effects of slowdown is likely to adversely impact both volumes and margins of the
chemical segment in the near future.
Conference Meeting Notes
SRF represented by Mr Rajendra Prasad, President & CFO
Analyst:
Dayanand Mittal, dayanandmittal@ambitcapital.com, Tel: +91 22 3043 3202
1. Expansion plans: The Company is looking to de-risk its business model by
diversifying from its TTB (Technical textile business) business as this segment
currently contributes more than 50% of its revenues. The Company is
expanding its chemical complex in Dahej from current capacity of 4,500tons to
~20,000tons at a capex of `8bn and is expected to be operational in next 2-3
years. The company expects to take advantage of the growth coming in from
the automobiles, textiles and mining sectors.
2. Buy back and dividend plans to continue: The Company plans to continue
with its buyback and dividend plan because they are generating significant
cashflows in its existing business and their current capex plans are well funded.
3. No impact from Kyoto protocol extension: The Company doesn’t foresee
any impact from extension of Kyoto Protocol deadline from Dec 2012 to 2017
as UNFCCC doesn’t recognize their methodology of booking Carbon credits;
hence they would not get any extension. Thus SRF will only be able to
monetize the carbon credits earned till Dec 2012 and sold by May 2013. The
company said that it earned carbon credit of `1.8bn during 1HFY12 (reported
PAT for 1HFY12 was `1.9bn).
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