Query Trends : SRF

Query: What is the outlook of SRF? the company seems to be having a lot of carbon credits and approved projects which gives revenue and profit visibility till 2012, however stock continues to trade at PE of 4...I am a long term investor in SRF(1-2yrs). What is the likely target on this? Chirag Shah

Thebullishtrends: SRF share price closed today at Rs.180. Established in 1973, SRF Ltd. is a leading Indian player in Technical Textiles, Refrigerant Gases and having operating interests in Packaging Films and Pharma Intermediates sectors. The company comprises a group of different businesses like Technical Textile Business, Chemical Business and Packaging Films Business. With seven production units in India and one overseas in Dubai under its fold, the company exports its products to over 60 countries.

SRF enjoys a significant presence in the global market as well for all the three products under its Technical Textile Business - tyre reinforcements, belting fabrics and coated fabrics. Its tyre cord fabrics are used as reinforcement material for all categories of tyres – from bicycles to heavy commercial vehicles. The company’s Belting Fabrics are used as reinforcement material for manufacturing conveyour belts and its coated fabrics find applications as static and dynamic covers in various areas ranging from Agriculture to Defence applications.

SRF's Chemicals Business includes the Fluorochemicals and Fluorospecialities business lines. In the Fluorocarbon business space, SRF has grown to become the undisputed domestic market leader in its core product line of Refrigerant gases, while exporting two-thirds of its production to world-class international buyers spread across 60 countries. Refrigerant gases are used for a variety of industrial, commercial and household applications such as refrigeration and air-conditioning, as a blowing agent for insulating foam, as a propellant for aerosols, in mobile air conditioning, and as a propellant in metered dose inhalers for pharmaceutical companies.

The company’s Packaging Film Business produces PET films, which are used in packaging of food, cosmetics, personal and health care products. The focus of the business is to move up the value chain of packaging films and towards this end, it is a supplier of metallised films and holographic films apart from plain and chemically treated polyester films.

Carbon credits, which have monetary value, are given to companies across the world that help in reducing polluting gases such as carbondioxide, methane, hydrofluorcarbons and others. The company is enjoying these carbon credits.

SRF is one of the largest players in flurochemicals and refrigerants business in India. As per the Kyoto Protocol, SRF would be a major beneficiary of reducing polluting gases. This, in turn, will help the company to receive carbon credits, which have monetary value.

SRF is planning invest over Rs.250 Cr,in setting up Greenfield packaging unit and captive wind power turbine over next two years and it will invest Rs.165 Cr to double its packaging film production capacity the company also interested to invest Rs.92 Cr additionally in captive power plant.

SRF shares are trading at low 5.49 P/E. SRF has started to show signs in rise of the share price. Many of players stuck with this stock since last few quarters. SRF is having strong expansion plans once these plans materialised then the profitablity will be much better for the company. Technically SRF share price will settled down at Rs.200 in near term.

As you are a long term investor and already you are having SRF shares remain invested in this scrip for long term gains.