SRF Ltd's consolidated revenue for Q3FY19 came in at Rs1,964.04cr, up 40.6% yoy. The operating profit for the quarter stood at Rs331cr, up 42.9% yoy. The EBITDA margin (excluding forex impact) for the quarter expanded ~27bps yoy to 16.9% in Q3FY19. The net profit for the quarter stood at Rs165.71cr, up 26.3% yoy. The revenue and PAT are in-line with estimates; however, EBITDA missed the estimates of Rs360cr by 8%.
• Overall traction in SRF's revenue during the current quarter is on account of likely high volumes across segments under the chemical and packaging film businesses. However, price realizations did not fully cover input cost pressures and volatile cross currencies as evident in the gross margin. There were also significant levels of inventory losses in crude-based businesses.
• Gross margin declined ~475bps yoy during Q3FY19 on account of likely cost inflation from raw materials and fluctuation in foreign currency, and a shift in product mix towards the packaging film business (comparatively less EBIT margin). The EBITDA margin expanded ~27bps yoy to 16.9% majorly through high operating leverage. This is despite the 25% and 18% yoy increase in power & fuel and other expenses to Rs158.5cr and Rs217.3cr, respectively, in Q3FY19.
• Forex gain stood at Rs10.2cr in Q3FY19 as against Rs21.1cr in Q3FY18.
• Technical Textile business (TTB): Segment revenue from TTB increased 21.1% yoy to Rs547.8cr in Q3FY19. However, the segment EBIT increased marginally by 7.2% yoy to Rs76.6cr as compared to the revenue with a drop of ~195bps in EBIT margin to 14.9% in Q3FY19.
• Chemicals and Polymers Business (CPB): Segment revenue from CPB increased 45.8% yoy to Rs586.0cr in Q3FY19 on account of higher volumes. However, the segment EBIT is up only 4.6% yoy to ~Rs76.6cr in Q3FY19. EBIT margin declined ~516bps to 13.1% in Q3FY19. This is likely due to input cost pressures coupled and other external factors.
• Packaging Film Business (PFB): Segment revenue from PFB increased significantly by 63.3% yoy to Rs702.6cr in Q3FY19 backed by volumes growth due to ramping up of new capacities. The segment EBIT increased 40% yoy to Rs88.1cr. The EBIT margin declined ~209bps to 12.5% in Q3FY19.
• The effective tax rate decreased to 16.7% in Q3FY19 vs 24% in Q3FY18, leading to higher net profit during the quarter.
• The Board approved a project to debottleneck certain specialty chemical plants to further increase the production capacity at Dahej at an estimated cost of ₹140cr.
• The Board also approved a proposal to install additional spinning and textile capacity at the Technical Textiles Plants in Manali and Gwalior at an estimated cost of ₹80cr, which will be incurred over a period of three years.
SRF Ltd ended at Rs1,961, down 8.05 points, or 0.41%, from its previous close of Rs1,969.05 on the BSE. The scrip opened at Rs1,960 and touched a high and low of Rs1,988.70 and Rs1,951, respectively. A total of 4,59,405 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 50-DMA.
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