Valuations weigh on SRF outlook, gains factored in

Regulatory changes may do little to help

- RAM PRASAD SAHU

Shares of India’s largest listed specialty chemicals maker, SRF, have been trading at their lowest levels in six months. While there have been tailwinds, such as the anti-dumping duty (ADD) on imports of R-134a refrigerant, the lack of price differential between imports and exports has made the regulatory change inconsequential.

Further, the lack of a broad-based recovery in prices across speciality and commodity chemicals will weigh on the performance of the sector, as well as SRF. Brokerages, however, have a mixed view about the impact of the regulatory changes and outlook on the stock.

The immediate triggers for the stock are the ADD and September quarter earnings. Recently, the government applied ADD of $4,500 on the import of R134a from China. While SRF is the only manufacturer of R134a, the difference between import and export realisations have come down, which would limit the gains from the duty.