Shares of SRF jumped almost 5% on BSE on September 1 despite weak market sentiment as the benchmark Sensex fell 1.3%.
The stock ended 4.76% higher at ₹2,665.75, extending the gains into the fourth consecutive session.
The stock hit its fresh 52-week high of ₹2,773 on BSE on April 8, 2022. As of September 1, the stock is 10% up this calendar year and 4% down from its 52-week high.
Brokerage firms have mixed views on the stock.
Kotak Institutional Equities retained a 'buy' call on the stock with a target price of ₹2,830 after the brokerage firm met SRF’s top management team on August 30.
As per a BSE filing, the management of SRF had a meeting with some institutional investors and analysts in Mumbai on August 29 and 30.
"Based on the fresh outlook provided by management, we raise FY2024-25E earnings per share (EPS) by 1-3% to build a faster ramp-up in fluoropolymers and aluminium foils than we had previously assumed. We also roll forward our fair value estimate to September 2023 (from June 2023), in the process raising it to ₹2,830," said Kotak.
The brokerage firm further added that it believes that while the stock is currently not too far from fair valuations, earnings growth should still drive double-digit returns in the coming years.
Kotak said that the large addressable opportunity ahead of the company and the proven execution track record of management underpin our positive bias.
JM Financial, too, has retained a buy call on the stock with a target price of ₹3,000 after its interaction with SRF’s management on the long-term opportunities in various sub-segments the company operates.
The brokerage firm highlighted that the key highlights of the interaction included (1) chemicals capex of nearly ₹120-130 billion over the next five years, (2) goal to grow the chemicals business at 20% while maintaining 20% RoCE, (3) accelerate the growth of the pharma piece to more than 30%, (4) take the fluoropolymer revenue contribution to $150-200 million over the next five years, and (5) grab the incremental opportunities in HFOs, electronic and battery chemicals.
"We retain our estimates and maintain buy as we believe SRF remains at the forefront of capturing growth in the fluorochemicals space," JM Financial said.
However, brokerage firm ICICI Securities has downgraded the stock to a 'hold' from an 'add' with a target price of ₹2,460.
The brokerage firm said the company is sensing opportunities in industrial chemicals, particularly in import substitution, which will help India build a strong indigenous chemicals ecosystem. Capex of ₹25 billion is planned for the packaging films business, but the company will be more watchful of the near-term outlook.
"SRF believes it is well positioned to deliver consistent revenue growth of more than 20% with more than 20% RoCE for the next five years. We maintain our estimates though we downgrade the rating by one notch to 'hold' from 'add' due to the recent stock price run-up and near-term pressures in the non-chemicals business. We are impressed with the management vision and continue to believe SRF is the best India chemicals story in the medium term," ICICI said.
According to a MintGenie poll, an average of 24 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of broking firms. These do not represent the views of MintGenie.