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SRF has a presence across fluorochemicals, specialty chemicals, packaging films, technical textiles, and coated and laminated fabrics. However, it is the company's fluorochemicals and specialty chemicals segments that are expected to emerge as the key drivers, fuelling its long-term growth.

Banking on the recent phase of high growth for the specialty chemicals space, SRF has reported revenue/EPS growth at 22 percent and 35 percent CAGR (Compounded Annual Growth Rate), respectively, in the last five years. But that's not all, the company has also been dedicated to a phase of rapid capacity expansion as it aims to present itself as an alternative to China within the specialty chemicals suppliers space.

The underlying aspect of SRF's strong growth prospects is its management's confidence. Despite the recent slowdown within the chemicals industry due to high-cost inventory destocking, the management has continued to stick to its capacity expansion plans, securing its future even if the present looks a bit bleak.

For context, projects worth about Rs 3,200 crore are expected to get capitalised in FY24. They include Rs 1,100 crore capex for fluorochemicals and Rs 1,400 crore for specialty chemicals.

With the exit or clamp down in production by several European players due to environmental restrictions in Europe, the company has also managed to fill the void and gain some market share within the global specialty chemicals market, especially in fluorine-related products.

Adding to that, brokerage firm Nirmal Bang Institutional Equities also highlighted that China's chemicals industry focuses mainly on bulk chemicals and lacks a player with a strong presence in the organic fluorospecialty space, whereas India has the relevant skill sets and could be a big beneficiary.

"US, EU and Japan are aggressively looking at India as the alternative supply destination to China and hence are also ready to pay the premium as Indian companies have better capabilities in the organic fluoro specialty business," the firm stated.

Moreover, considering that most domestic chemicals companies are investing heavily in expanding their capabilities in the backdrop of the large opportunity size, the firm believes that pure-play fluorine companies like SRF are preferred options when fluorination is the core chemistry in the molecule being developed by the customer.

Moreover, SRF is also making a full-fledged foray into Active Pharmaceutical Ingredients (APIs), set to materialise over the next two years, which will open more avenues of revenue generation.

Besides, the government is also pushing towards reducing India's reliance on Chinese imports for chemicals that can be made domestically. A likely production-linked incentive scheme might also be on the cards for the chemicals sector which will only add to the multiple growth boosters for SRF.

Sharekhan also sees SRF as a quality player and believes that its investment in the specialty chemicals space provides strong long-term earnings growth prospects.

@arbindtiwariT