SRF Ltd, a leading manufacturer of technical textiles, engineering plastics, chemicals and packaging films, is the one stock that outperformed throughout the year.
The stock is up almost 65 percent this year and it works into three segments. The first one is the speciality segment that caters to segments like agrochemicals, pharma industry and it forms around 32 percent of the total revenues.
The second segment that is packaging that forms 34 percent of the total revenues and that caters to the fast-moving consumer goods (FMCG) sector.
Coming to the third segment, it is the technical textiles that form around 27 percent of the total revenues and the margins here are healthy as well.Key drivers for the stock performance:
Sole producers & manufacturer of 3 products:
- Strong margins across segments in Q2FY20.
- Increase in refrigerants volumes in the domestic market and market share rose despite auto sector slowdown.
- Improved contribution from chloromethane segment.
- Only Indian company to develop R134A and R32 refrigerants using in-house technology.
- Only Indian manufacturer of Dymel 134a/P.
- Only Indian manufacturer of polyester tyre cord fabrics.
In the second quarter, the company maintained its guidance of 40-50 percent growth in the chemical segment and around 20 percent fluorochemicals segment.
There is a high volume speciality products capex that company is doing so there are three plants they will be setting up. The first plant cost Rs 40 crore and the second one which is expansion and modernisation of tyre chord value chain at Rs 125 crore and the third one is BOPP film line in Thailand at the outlay of Rs 350 crore to help replace imports. They will finance capex through a mix of debt and internal accruals.
The key risks that the company has to face is the slowdown in the auto sector, to impact technical textiles business and oversupply in packaging films business across the globe, which could put pressure on the BOPP and BOPET spreads.