Morgan Stanley Cautious on SRF After Mixed Q2FY26 Results
Morgan Stanley maintains an underweight rating on SRF Limited with a target price of ₹2,175 per share after the company's Q2FY26 results missed expectations. While SRF's profit grew year-on-year by 93%, it declined sequentially and was below Morgan Stanley's estimates. Weakness in specialty chemicals and subdued packaging films demand were noted as challenges, with near-term earnings expected to remain under pressure.
Morgan Stanley reviewed SRF Limited's Q2FY26 financial results, noting a 93% year-on-year increase in core profit after tax to ₹3.9 billion, though this represented a 10% sequential decline and missed their estimates by about 10%. The brokerage cited mixed segment performance: stronger refrigerant gases were offset by weaknesses in specialty chemicals, leading to below-expected chemicals EBIT. Additionally, the packaging films business underperformed due to reduced market volumes and weaker end-user demand. Despite acknowledging SRF’s long-term growth potential, Morgan Stanley flagged concerns over near-term earnings volatility driven by specialty chemicals fluctuations and limited pricing power in packaging. Due to these factors, the brokerage prefers companies with more diversified exports and stable cash flow generation. They maintained their underweight rating on SRF with a ₹2,175 target price, reflecting caution over short-term performance challenges despite SRF's strong yearly profit growth and revenue increase reported elsewhere. Morgan Stanley’s views suggest careful scrutiny is warranted amid volatile sector conditions and subdued demand within SRF’s business mix.
