SRF reported mixed Q3FY26 financial results, with consolidated revenue reaching ₹37.10 billion, representing a 6.3% year-on-year increase and 2% quarter-on-quarter growth. The performance reflected varied segment dynamics, with some businesses showing strong momentum while others faced market pressures.

Segment-wise Performance Analysis

The company's business segments delivered contrasting results during the quarter:

The Chemicals segment emerged as the standout performer, posting robust 22% year-on-year growth and 9% quarter-on-quarter expansion. The Fluorochemicals business also delivered strong results, supported by higher volumes and improved price realizations across key products.

Challenges in Key Segments

The Performance Films segment faced significant headwinds, declining 3% year-on-year and 5% quarter-on-quarter. Margins in this segment contracted by 130 basis points sequentially due to reduced volumes and range-bound pricing in BOPET and BOPP products. The segment continues to face competitive pressure from low-cost imports and experienced temporary disruptions related to GST 2.0 implementation.

The Technical Textiles business also came under pressure, particularly impacted by margin stress in Belting Fabric operations. This was attributed to the continued influx of cheaper Chinese imports and US tariffs affecting export volumes.

Investment Plans and Future Outlook

SRF has outlined significant capital investment plans for expansion:

Despite these expansion plans, the company faces ongoing market challenges including subdued agrochemical demand and persistent oversupply from Chinese producers, which remain key concerns for the business outlook.

Analyst Recommendation

Prabhudas Lilladher maintains a cautious stance on SRF, issuing a 'Hold' rating with a target price of ₹2,994 based on Sum-of-the-Parts (SOTP) valuation methodology. The brokerage firm's recommendation reflects the mixed performance across business segments and ongoing market uncertainties, particularly in the agrochemicals space and competitive pressures from international markets.

SRF shares experienced a significant decline of 6% on Wednesday, January 21, following management commentary during a post-earnings conference call that highlighted persistent competitive pressure from Chinese players across several core product categories. The company's leadership acknowledged the challenging market dynamics while expressing cautious optimism about future demand recovery.

Management Commentary on Market Challenges

During the conference call, SRF management provided detailed insights into the competitive landscape affecting the company's operations. The leadership noted that Chinese competitors are finding it increasingly difficult to sustain current price levels, suggesting that the present situation may not be viable in the long term. This competitive pressure has been particularly evident across multiple product segments, creating margin compression challenges for the company.

The management highlighted specific recovery signs in the agrochemicals sector, which is used in crop protection applications. Additionally, they noted witnessing early signs of recovery in the domestic market for both BOPP (Biaxially Oriented Polypropylene) and BOPET (Biaxially Oriented Polyethylene Terephthalate) films from December 2025 onwards.

Segment-Wise Performance Analysis

The refrigerant gas segment emerged as a standout performer, driving the overall 26% year-over-year EBITDA increase and 1% sequential growth. However, the company faces capacity constraints in this segment, limiting potential volume upside from previous year levels.

Brokerage Outlook and Price Targets

Major financial institutions have maintained negative outlooks on SRF, with three prominent brokerages projecting significant downside potential:

Jefferies Analysis

Jefferies maintained its "underperform" rating with a price target of ₹2,640.00 per share. The brokerage noted that while EBITDA performance aligned with expectations, the specialty chemicals segment showed softness. They highlighted that the stock has outperformed the Nifty by 29% in 2025, primarily driven by refrigerant gas strength, and currently trades at plus one standard deviation above its long-term average.

Citi's Assessment

Citi retained its "sell" rating with a ₹2,575.00 price target, citing underperformance relative to estimates driven by lower EBIT margins in the chemicals segment. The brokerage identified several downside risks to consensus expectations, including:

• High base effects heading into the fourth quarter
• Continued pricing pressure from low-cost Chinese competition
• Deferred procurement by agricultural majors
• Expected R32 capacity additions by multiple players in 2026

Morgan Stanley's Perspective

Morgan Stanley maintained an "underweight" rating with the most bearish price target of ₹2,177.00 per share. The brokerage noted that SRF's FY26 guidance of 20% topline growth implies 15% growth in the March quarter, which hinges on a sharp recovery in specialty chemicals during the fiscal fourth quarter.

Market Performance and Outlook

Shares of SRF closed at ₹2,709.80 on Wednesday, reflecting the 6% decline. The stock has experienced broader weakness, declining 13% over the past month. Despite near-term challenges, management expressed cautious optimism about demand recovery, particularly noting potential improvements in domestic markets and the unsustainable nature of current Chinese pricing strategies.

The company continues to navigate tariff uncertainty in the US market, which may create short-term volatility in the fluorochemicals segment. However, management believes that signs of recovery in agrochemicals and domestic packaging films could provide support for future performance.