SRF Q1FY27 growth supports HFO expansion and specialty packaging shift

Investment View and Business Mix

ICICI Direct Research’s July 24, 2026 result update on SRF Limited retains a BUY rating, citing a stronger medium-term outlook supported by robust HFC demand, a gradual recovery in Specialty Chemicals and a strategic shift in Performance Films towards less cyclical, higher-value products.

SRF operates across Chemicals, Packaging Films and Technical Textiles. Chemicals represented 46 per cent of revenue, Packaging Films 40 per cent, Technical Textiles 12 per cent and other businesses 2 per cent.

Q1FY27 Financial Performance

SRF reported broad-based Q1FY27 growth. Consolidated revenue rose 32 per cent year-on-year to Rs 4,939 crore, while consolidated EBITDA increased 49 per cent year-on-year to Rs 1,237 crore. EBITDA margin expanded about 280 basis points year-on-year to 24.6 per cent. Chemicals EBIT rose 27 per cent year-on-year to Rs 638 crore.

HFC and Fluorochemicals Growth Drivers

The broker highlights strength in SRF’s HFC business, where Refrigerants and Propellants, Chloromethanes and Fluoropolymers benefited from volume growth and improved realisations. PTFE ramp-up is progressing, including the addition of higher-value grades.

SRF has increased planned capex for its next-generation refrigerants, or HFO, project to Rs 2,285 crore from Rs 1,100 crore previously. The project is expected to raise total HFC capacity to 65,000 TPA from 52,000 TPA. Greenfield HFO expansion at the Odisha fluorochemicals complex and investments in new fluoropolymers are viewed as qualitative growth drivers.

Specialty Chemicals Recovery

Management said Specialty Chemicals is showing early recovery after a prolonged downturn. Customer offtake and volumes have improved, while China-led price erosion appears to have bottomed, with marginal price improvement in key products. However, the business remains exposed to global pricing trends, Chinese industry overcapacity and geopolitical developments.

Management retained Chemicals growth guidance of 15 per cent to 20 per cent for FY27 and is targeting the upper end. SRF is developing six to seven innovator molecules, although regulatory registrations and innovator product launches remain bottlenecks to commercialisation. Pharma is a long-term growth priority, with a target of about 30 per cent of Specialty Chemicals revenue by FY30.

Operating Outlook and Project Updates

Management expects Q2FY27 and Q3FY27 refrigerant volumes and pricing to moderate sequentially from the strong Q1FY27, although year-on-year growth should remain strong. The Chemours project has been delayed by a few months due to customer-requested design changes and equipment shipments from Europe.

PTFE is moving towards higher-value grades, with meaningful contribution expected from the end of FY28. The PVDF plant is scheduled for commissioning by the end of Q2FY27, with meaningful volumes expected from FY28.

Performance Films: Shift Towards Specialty Products

In Performance Films, Q1FY27 profitability was helped by temporary supply disruptions at competing facilities linked to Middle East geopolitical issues, which supported volumes and pricing. Management expects quarter-on-quarter margin normalisation in Q2FY27.

Industry oversupply, particularly in BOPP films, continues to pressure pricing, though management believes the cycle has largely bottomed. SRF is pursuing structurally better margins through overseas subsidiary turnaround and specialty products.

The company approved Rs 250 crore capex for a 25,000 MTPA BOPET thick-film line for electrical and electronics applications. Investments in capacitor-grade BOPP, metallisers, coatings and higher-value aluminium foil applications, including aseptic packaging, aim to reduce thin-film cyclicality.

Capacitor-grade BOPP commercial sales are expected in FY27, with near-full utilisation targeted by Q1FY28 to Q2FY28. Aseptic-packaging approvals could create a high-value opportunity from FY28.

Capex, Estimates and Valuation

SRF maintained FY27 capex guidance of about Rs 2,500 crore across fluorochemicals, specialty chemicals and packaging films, and approved an additional Rs 250 crore for specialty-chemicals intermediates.

ICICI Direct’s Rs 3,160 target price is based on a sum-of-the-parts valuation using FY28E EBITDA multiples of 25 times for Chemicals, 10 times for Performance Films and five times for Technical Textiles.

Key Risks

• Continued pricing pressure in Specialty Chemicals.
• Delays in HFC capex.