Book Partial Profit - SRF

SRF formed a part of our recommendations in issue no. 9, dated April 12-25, 2010. This company, which was suggested by us under our choice scrip column at a price of Rs 212.65, has performed outstandingly. It has given high returns to our investors in a matter of seven months. Since our recommendation, the scrip touched a 52 week high of Rs 444.30, thereby providing an overall appreciation of 109 per cent. While at CMP of Rs 328, the current appreciation stands at almost 54 per cent. This is quite huge considering the fact that the Sensex has given an upside of just 10 per cent during the same time period. Thus, our recommendation has indeed managed to create good alpha for our readers.

SRF operates in three segments viz., the Technical Textile Business (TTB), the Chemicals and Polymers Business (CPB) and the Packaging Film Business (PFB) each contributing 50 per cent, 34 per cent and 16 per cent respectively to the total sales. Through these segments, SRF caters to various industries such as automobiles, infrastructure, consumer durables, pharmaceuticals, agrochemicals, etc.

Factors such as consistent performance with growth, a five-year CAGR of 22 per cent in profits and 17 per cent in sales, an aggressive capex of Rs 1,400 crore from FY08 through FY11 for expansion, backward integration and driving growth inorganically, market leadership, carbon credit potential and last but not the least, very low valuations made us recommend SRF. Though SRF has achieved our (conservative) target of Rs 296, it still has plenty of upside potential. Hence it makes sense to book partial profits and hold the rest.