SRF's Q2 Profit Surges on Strong Chemicals Business Performance; Brokerages Maintain Positive Outlook

SRF Limited announced a substantial year-on-year jump in its profit for the September quarter of fiscal year 2026 (Q2FY26). This impressive growth was largely fueled by a sharp improvement in its chemicals business segment, even as other business areas showed mixed performance.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) stood at ₹780 crore, marking a 44 per cent increase compared to the previous year, though it saw a 7 per cent sequential decline. Brokerages like Emkay Global Financial Services and Nuvama Institutional Equities maintained a positive stance, highlighting SRF's consistent margin strength, steady volume increases, and ongoing strategic capital expenditure.

Emkay Global Financial Services noted that the year-on-year margin improvement was driven by firm refrigerant gas pricing in export markets, increased volumes in specialty chemicals, operational efficiencies, and better realisations in packaging films and aluminum foil. The company has maintained its FY26 revenue growth guidance of 20 per cent for the chemicals business and revised its overall capital expenditure target to ₹2,200–2,300 crore.

The chemicals segment emerged as the top performer, with revenues growing 23 per cent year-on-year to ₹1,670 crore. Its Ebit margin surged to 28.9 per cent from 18.1 per cent a year prior. Furthermore, SRF expanded its tie-up with Chemours for advanced fluoropolymers and fluoroelastomers, increasing the project outlay to ₹745 crore, with commissioning expected by December 2026. The company also acquired 300 acres in Odisha for ₹280 crore to support its chemical business expansion.

Performance in other segments was varied. The performance films and foil business revenue remained flat year-on-year at ₹1,410 crore, but margins improved due to higher value-added product sales and better realisations. However, the technical textiles business saw an 11 per cent revenue decline year-on-year to ₹470 crore, pressured by Chinese imports.

Nuvama Institutional Equities echoed the positive sentiment, reiterating a 'Buy' rating and increasing the target price to ₹3,841. They highlighted strong traction in the fluorochemicals and specialty chemicals segments, supported by robust global demand and new agrochemical/pharmaceutical intermediates. The Odisha land acquisition is seen as a foundation for an integrated chemical complex.

Impact This news is highly positive for SRF Limited, likely boosting investor confidence and potentially leading to an increase in its stock price. The strong performance in the chemicals segment, coupled with strategic expansion plans and positive brokerage outlooks, suggests continued growth potential. This could also positively influence sentiment for other chemical companies in India. Rating: 8/10.

Difficult Terms EBITDA: Earnings Before Interest, Tax, Depreciation, and Amortisation. It's a measure of a company's operating performance. Year-on-year (Y-o-Y): Compares a period's results to the same period in the previous year. Sequentially (Q-o-Q): Compares a period's results to the immediately preceding period (e.g., Q2 vs Q1). Fluoropolymers: Polymers containing fluorine atoms, known for their resistance to heat and chemicals. Fluoroelastomers: Synthetic rubbers with excellent resistance to heat, chemicals, and oil. Specialty Chemicals: Chemicals produced for specific functions and performance characteristics. BOPP: Biaxially oriented polypropylene, a type of plastic film used in packaging. HFC-32: A refrigerant gas. China+1 strategy: A business strategy to diversify supply chains by sourcing from China and at least one other country.