SRF reported its Q4FY26 results in early May and provided a strong outlook. We had earlier recommended a hold on the stock in August 2025 because valuations were elevated at 44 times one-year forward earnings even when factoring for expectations of strong growth. Since that call, the stock has declined 4 per cent, even though the company delivered 7 per cent year-on-year revenue growth to ₹15,787 crore and 44 per cent PAT growth to ₹1,835 crore in FY26. Valuations have now moderated to 36 times one-year forward earnings, broadly in line with the five-year average. We now recommend that investors accumulate the stock on market corrections linked to the US-Iran conflict. Two of SRF’s three large segments—speciality chemicals and performance films—are expected to recover over the longer term. The company has navigated recent challenges well, as reflected in its latest results. However, volatility in energy costs and global trade remains an overhang for both the company and the broader economy.

As shown in the table, the largest segment of chemicals delivered strong revenue and EBIT growth in FY26. Even as the Performance films segment reported weak revenue growth, the revival in margins aided strong profit growth. The company is expected to see similar trends in the next fiscal too.

Chemicals business

The division includes speciality chemicals and refrigerant gas (RG) business. The SRF management expects to drive 15-20 per cent revenue growth in FY27 for the Chemicals segment, which should be primarily supported by the RG sub-segment. This is on the base of a 16 per cent growth in FY26 for chemicals.

The year gone by witnessed strong volume and price growth for RG. Internationally, RG sales are now under a quota regime to limit the impact of greenhouse gases. This appears to have benefited existing companies in the business with elevated volumes and better price realisations. The company should gain further, as it debottlenecks its facilities and secures volumes and continues to be supported by improved prices. It expects to add 10-15 per cent volume by debottlenecking for a total volume of 65,000 tonnes per annum in capacity.

SRF is building a facility for RG, developed from in-house research, which is a fourth-generation RG and is likely to be environmentally sustainable. The plant is expected to be commercialised by February 2028. The project includes annual RG capacity of 20,000 tonnes and a 30,000-tonne hydrofluoric acid (a raw material) facility to support production, while also offering potential to explore electronic-grade sales.

The company has entered into a strategic collaboration with Chemours (the US-based chemicals major that was spun off from Dupont) for the manufacture, supply and distribution of fluoropolymers and fluoroelastomers. The multi-year arrangement caters to global markets across diverse industries such as semiconductor, automotive, aerospace, chemical processing, and oil and gas. The company has allotted a capital outlay of ₹745 crore for the project that will be completed by December 2026 and should contribute to revenues towards Q4FY27.

It has also started trial production of higher grades of fluropolymer – PTFE, which should also contribute to sales this fiscal.

On the other hand, the speciality chemicals sub-segment under the Chemicals segment has been facing lower volume in demand and pricing pressure on account of Chinese competition in the last two-three years. This is similar to performance films and technical textiles division as well. To counter the same, SRF has developed a pipeline of advanced intermediates in agro chemicals division, which are under client evaluation. The company will utilise new launches even as the old portfolio is expected to face increasing competition. The recent quarter indicates an easing of pricing pressure, as the speciality chemicals cycle may be improving, but the timing of recovery is yet unknown. SRF is also developing a pharma intermediates platform, under which several early-stage intermediates are under sales, and the company aims to develop a larger, more advanced portfolio, supplementing agro chemicals.

It expects a capital expenditure of ₹2,500 crore in FY27, which includes facilities supporting chemicals division. SRF has acquired land in Odisha, where a greenfield plant will be developed. Supported by pharma intermediates and agro chemical launches in speciality chemicals, fourth-generation RG launch, Chemours project and PTFE advanced-grade launches, SRF expects to drive 15-20 per cent revenue growth for chemicals in FY27.

Margin revival in PF division

As stated, performance films and technical textiles divisions are also facing Chinese competition. But the performance films (manufactures packaging films) division is showing improved margins, as pricing pressure eases. The segment reported 220-bp improved EBIT margins in FY26, which is likely to continue. SRF is conducting trial runs for a higher-grade performance film plant and adding a new production line for a higher-grade film in FY27. This should further support margin recovery and also revenues if the pressure eases.

The company has a comfortable net debt to EBITDA of 1.29 times in March 2026, which supports the strong capital expansion the company has undertaken for FY27. SRF has reported only a minor impact from the US-Iran-Israel conflict: disruption in RG sales to West Asian countries, which it has redirected through other routes. But considering the energy volatility, raw material sourcing from China and trade disruption, we recommend investors accumulate the stock on dips with an eye on longer-term recovery.

Published on May 16, 2026