• Your Company performed well in FY19, which is largely due to our diversified business model, with all the core business segments delivering an encouraging operating and financial performance in a fast-evolving and volatile global and domestic environment. This has been possible due to the management’s focus in the last few years to strengthen the Company’s foothold through the strategic levers of operational efficiency, adoption of superior technology, the addition of appropriate value-added products to its portfolio and deeper market penetration.
  • In the year gone by, we realigned our businesses into four segments to enable a clear understanding of our core businesses. Consequently, the Coated and Laminated Fabrics Business and the Engineering Plastics Business were regrouped as Other Businesses and the erstwhile Chemicals and Polymers Business was renamed as Chemicals Business, which comprises Fluorochemicals and Specialty Chemicals Businesses.
  • In terms of business segments, the Chemicals Business delivered a healthy performance during the year. In the Fluorochemicals Business, our prudent investments in innovation and technology has made us one of the very few, fully backward integrated producers of Refrigerant Gases in the world, offering the widest portfolio of gases and value-added products to our customers.
  • We continue to maintain a dominant position with the largest market share of refrigerants in the Indian market, while at the same time further increasing the penetration of our FLoRoN® brand of refrigerants in the overseas markets. The Chloromethanes plant at Dahej, which we commissioned in December 2017, is functioning at optimal level, leading to higher sales for the segment. During the year, we also launched a new product in the Indian market under the name, SUPERTRoN AC Air Pure.
  • About the Specialty Chemicals Business, while the first six months in FY19 were tough, we are now witnessing a revival in the agro-chemicals space, with new product opportunities emerging in both the agro and pharma segments. Along with the revival in the industry, our committed investments in this business are already in place. These include a cGMP plant, a P32 plant, which is our first-ever, most complex Active Ingredients (AI) plant and a P34 plant, which was commissioned in record time, to seize any opportunities that the future may present.
  • In the Packaging Films Business, we continue being an ‘Easy to do business with’ partner by delivering excellence in manufacturing, efficiency in supply, and success in customer engagement. Our ongoing investment in our people and manufacturing sites in Thailand and Hungary will ensure we continue to deliver excellence to satisfy the packaging requirements of every customer.
  • The Technical Textiles Business delivered a steady performance during the year despite a challenging operating environment. Our focus on increasing operational efficiency continues to be an ongoing process. With our investments in capacity augmentation across Tyre Cord Fabric and Belting Fabrics segments, we remain optimistic about the future performance of the Technical Textiles Business.
  • In May this year, we also signed a definite agreement to sell our Engineering Plastics Business. We view this as a strategic step towards focusing on our core businesses where we see larger growth opportunities emerging in the future.
  • Total revenue from operations of the Company on standalone basis increased by 38.08 per cent from Rs. 4677.93 Crores in 2017-18 to Rs. 6,459.34 Crores in 2018-19 mainly due to increase in revenue from operations. The profit before interest, depreciation and tax (PBIDT) including ‘other income’ on a standalone basis increased from Rs. 888.72 Crores in 2017-18 to Rs. 1,195.79 Crores in 2018-19.
  • Profit before tax (PBT) on a standalone basis increased by 35.20 per cent from Rs. 512.64 Crores in 2017-18 to Rs. 693.11 Crores in 2018-19. After accounting for the provision for taxation of Rs. 175.93 Crores, profit after tax (PAT) on a standalone basis increased by 27.49 per cent from Rs. 405.66 Crores in 2017-18 to Rs. 517.18 Crores in 2018-19.
  • The Business holds global leadership position in most of the products in its portfolio while it continues to invest in improving its capability and take up new age challenging molecules. The Business is strongly focused on increasing value to its customers through its sound technological knowledge and expertise.
  • The agrochemicals market is slowly picking pace, in line with the global trends. However, the market is still susceptible to pricing pressure coming from crude pricing and unpredictable weather conditions in the customer’s market. New agrochemical projects continue to move forward and are expected to pick up pace in line with the market.
  • In FY 2019-20, global demand for BoPET Films is expected to remain healthy; however, two new capacities (~75,000 MT/annum) are likely to get added during the year. Demand for BoPET Films in India is expected to grow by ~10% per annum. On the other hand, BoPP Film market will continue to be under pressure. Supply will continue to exceed demand leading to pressure on margins.
  • In view of the above, SRF’s strategy would evolve around continuously improving Business performance with 100% utilization of its assets and increased focus on Value Added Products, further enhancing the customer experience. Our major endeavor during the year will be to ensure timely start-up of both the new BoPET facilities.
  • In the Coated Fabrics segment, the Business performance will focus on further increasing the domestic market share and cost reduction initiatives. The Laminated Fabrics segment is likely to face similar oversupply situation in FY 2019-20. The Business will continue to target an increase in the overall sales with a focus on the hot lamination products.

 

My view: The company has proven itself over past many years and it shows in its earnings’ sustainability and consistent growth. However, the valuations are still a bit stretched and build in high expectations. Any significant fall in stock price may make the stock an attractive bet to add to the portfolio.

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