Mirae Asset Sharekhan has reinforced its BUY recommendation on SRF Limited with an unchanged price target of Rs. 3,540, representing significant upside potential from current levels. The specialty chemicals giant is positioned for robust growth driven by favorable refrigerant gas quota regimes under the Kigali Agreement and accelerating demand in both specialty chemicals and fluorochemicals segments. With management projecting 20% revenue growth for the chemical business and analysts forecasting a remarkable 51% profit compound annual growth rate through FY2027, SRF appears strategically positioned to capitalize on structural industry tailwinds and regulatory frameworks favoring established players.

Mirae Asset Sharekhan Maintains Bullish Stance on Chemical Conglomerate

Mirae Asset Sharekhan has reiterated its BUY rating on SRF Limited, maintaining an unchanged price target of Rs. 3,540 while assigning a 37x multiple on the company's projected FY2027 earnings per share. The research house's confidence stems from SRF's strategic positioning within evolving regulatory frameworks and its comprehensive backward integration across specialty chemicals and fluorochemicals.

Currently trading at Rs. 2,850, the stock presents a compelling risk-reward proposition with analysts projecting significant earnings acceleration over the medium term. The brokerage firm emphasizes SRF's role as a fully backward-integrated player with robust brand recognition and expansive distribution capabilities spanning over 100 countries.

Kigali Agreement Creates Structural Tailwinds for Refrigerant Gas Business

The implementation of the Kigali Agreement has established a quota-based regulatory framework that fundamentally reshapes the global refrigerant gas landscape. Under this international accord, countries are categorized into distinct groups with varying baseline periods and phase-down schedules.

For India, classified within Group 2 of A5 countries, the baseline period spans CY2024-2026, with quota calculations eventually transitioning to Global Warming Potential (GWP) terms. This regulatory structure creates significant barriers to entry while favoring established players like SRF with existing production capabilities and licensing frameworks.

Asia emerges as the primary geography for HFC production and consumption, with the transition from HCFC to HFC creating sustained demand momentum. India's stringent licensing requirements for HFC imports and exports ensure robust regulatory oversight, providing additional competitive advantages for domestic producers.

Financial Trajectory Points Toward Exceptional Growth Acceleration

SRF's financial projections present a compelling narrative of operational turnaround and earnings momentum. The company's consolidated financial metrics demonstrate remarkable recovery potential:

The trajectory indicates a remarkable transformation from recent sluggish performance, with adjusted profit after tax expected to grow at a 51% compound annual growth rate between FY2025-FY2027. This acceleration reflects both operational improvements and favorable market dynamics across SRF's diversified portfolio.

Strategic Business Segments Demonstrate Synchronized Growth Potential

Specialty Chemicals Division Gains Momentum: The specialty chemicals business exhibits renewed vigor through successful product launches and expanding market penetration. Management's confidence in achieving sustained growth reflects strategic investments in high-margin applications and expanding customer relationships across global markets.

Fluorochemicals Segment Capitalizes on Regulatory Advantages: The refrigerant gas business benefits from favorable demand-supply dynamics, particularly in domestic and Middle Eastern markets. Pricing environment improvements coupled with quota-based production limitations create sustainable competitive moats for established players.

Fourth-Generation HFO Capacity Expansion: SRF's upcoming fourth-generation hydrofluoroolefin (HFO) capacity represents a strategic leap toward next-generation refrigerant technologies, positioning the company advantageously within the evolving regulatory landscape.

Valuation Framework Reflects Premium Growth Prospects

At current market prices, SRF trades at 41x FY2026 estimated earnings and 30x FY2027 projected earnings, reflecting market recognition of the company's transformation trajectory. The research house's price target of Rs. 3,540 implies approximately 24% upside potential from current levels.

Key valuation metrics demonstrate improving operational efficiency:

Return on Capital Employed expected to recover from 11.6% in FY25 to 18.7% by FY27

Return on Equity projected to strengthen from 10.4% to 17.7% over the same period

Price-to-Book multiple compression from 6.7x to 4.9x indicates improving asset utilization

Risk Factors Merit Careful Consideration

Despite robust growth prospects, investors should acknowledge potential headwinds. Slower demand uptake from user industries could impact revenue growth trajectories, while concerns about product price corrections remain relevant considerations.

Chinese market dumping represents a persistent competitive threat, potentially pressuring pricing dynamics across key product segments. However, SRF's backward integration and regulatory advantages provide meaningful defensive characteristics.

Investment Recommendation and Target Levels

Target Price: Rs. 3,540 (24% upside from current levels)
Current Market Price: Rs. 2,850
Recommendation: BUY with medium to long-term investment horizon

The investment thesis centers on SRF's strategic positioning within favorable regulatory frameworks, operational turnaround momentum, and diversified revenue streams across specialty chemicals and fluorochemicals. With management projecting 20% chemical business growth and analysts forecasting exceptional earnings acceleration, SRF represents a compelling opportunity within India's specialty chemicals landscape.