SRF Ltd
NSE:SRF
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2 138
2 668
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
SRF Ltd
Earnings Call Analysis
Q1-2025 Analysis
SRF Ltd
The first quarter of fiscal year 2025 was challenging for SRF Limited, particularly due to difficulties in their Chemicals business. Despite the challenges, they reported gross operating revenue of INR 3,464 crores with an EBIT of INR 484 crores, which translates to a 14% margin. Their profit after tax was INR 252 crores. The company declared an interim dividend of INR 3.60 per share, a 36% payout.
The Chemicals business, which is a significant segment for SRF, experienced an 11% decline in revenue year-over-year, amounting to INR 1,482 crores. This drop was largely attributed to sluggish demand in the agrochemical sector, where inventory rationalization was observed. Despite these hurdles, SRF expanded its product portfolio with a pharmaceutical intermediate and made substantial progress in new product commercialization. They capitalized approximately INR 1,800 crores in projects last year and are focusing on efficiency improvements and customer needs this year. A gradual recovery in agrochemical demand is anticipated to positively impact the second half of the fiscal year.
The Fluorochemicals division saw a significant increase in domestic HFC product volumes due to heat waves and stable pricing of key refrigerants. While the U.S. market exhibited lower volumes and pricing for some refrigerants, the overall HFC volumes improved compared to the previous year. However, the chloromethanes segment faced subdued prices, and challenges continued. The new PTFE facility started gaining traction domestically, with export samples being sent for evaluation.
SRF takes pride in its robust R&D capabilities, with a team of over 450 professionals. They boast a significant patent portfolio, including 151 granted patents and 451 filed patents. The R&D efforts are directed towards developing advanced products in Specialty Chemicals and Fluorochemicals, focusing on new chemistries such as advanced intermediates, agrochemical ingredients, and next-generation refrigerants.
The Packaging Films business witnessed a 22% year-over-year growth, achieving INR 1,336 crores in revenue. Improved EBIT margins were driven by record production levels and robust value-added product (VAP) sales. Higher capacity utilization and stable demand benefited the BOPP and Film segments, although the BOPET segment continued to face oversupply and intense competition. Efforts are underway to optimize utilization in their new aluminum foil facility, with a production ramp-up expected in the second half of the year.
Revenue in the Technical Textile business grew by 13%, reaching INR 525 crores. Steady contributions came from the Nylon Tyre Cord Fabric and Polyester Industrial Yarn segments, despite softening demand for belting fabric. The focus remains on enhancing higher-margin value-added sales. Additionally, the company's commitment to renewable energy resulted in the highest share of renewable power usage during the quarter. Expansion projects are progressing as planned.
SRF maintained its market leadership in domestic coated fabric by volume and price, achieving record domestic sales. Strong seasonal demand is anticipated, and the aim is to increase profitability through higher domestic volumes and value-added products. In the Laminated Fabrics segment, SRF retained price leadership, although margins were pressured by oversupply.
SRF has built a resilient multi-business structure that positions the company well to navigate a dynamic environment. While certain sectors might face near-term challenges, the company's business model and expanding product profile are expected to sustain long-term growth and value for stakeholders. The management remains focused on leveraging their competitive advantages and expects improvements in various segments in the second half of the fiscal year.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the SRF Limited Q1 FY '25 post results earnings conference call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Archit Joshi. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us today. We at B&K Securities are pleased to host SRF Limited's 1Q FY '25 Results Conference Call. We have with us today Mr. Rahul Jain, President and Chief Financial Officer of SRF Limited.
I would now like to invite Ms. Nikita Dhawan, Head of Corporate Communications at SRF Limited, to initiate the proceedings for the results con call. Over to you, ma'am. Thank you.
Good afternoon, everyone, and thank you for joining us on SRF Limited's Quarter 1 FY '25 Results Conference Call. We will begin this call with brief opening remarks from our President and CFO, Mr. Rahul Jain, following which we will open the forum for an interactive question-and-answer session. Before we begin this call, I would like to point out that some statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Jain to make his opening remarks.
Thank you, Nitika. Good afternoon, everyone. I extend a warm welcome to you all, and thank you for joining us today for SRF Q1 FY '25 Earnings Conference Call. I trust all of you have had the opportunity to go through our results and the presentation shared with you earlier. I will begin the call by briefly taking you through the key financial and operational highlights for the period under review, following which, we will open the forum for a Q&A session. The current quarter was indeed a challenging one, primarily due to the ongoing environment in the Chemicals business. The challenges have notably impacted sales in both our Specialty and Fluorochemicals segments. Nevertheless, we remain confident of a revival in the second half of the current fiscal year.
In Q1 FY '25, our gross operating revenue stood at INR 3,464 crores and EBIT was recorded at INR 484 crores, representing a 14% margin. Meanwhile, profit after tax came in at INR 252 crores. During the quarter, the Board has approved an interim dividend amounting to INR 3.60 per share, which is about 36%.
Coming to our segmental performance. The Chemicals business reported revenues of INR 1,482 crores, a decline of 11% over the corresponding period last year. The Specialty Chemicals segment faced certain challenges during the quarter, largely owing to sluggish demand in the agrochemical sector as some customers continued the inventory rationalization measures which we have seen since Q2 FY '24. While some of this is now coming to an end, a clear guidance on when will the pickup happen is still unknown. Amidst these hurdles, I am pleased to share that we made notable strides in expanding our product portfolio, including launch of a new pharmaceutical intermediate and have made suitable -- substantial progress in the commercialization of some new products that have yielded positive traction in Q1 FY '25.
We had capitalized on approximately INR 1,800 crores of projects in the Specialty Chemicals business last year and are now focusing on ramping these up in FY '25. Our efforts are also directed towards cost structures, efficiency through tech interventions and process improvements, and continued discussions with customers for meeting their current and future requirements. With anticipated gradual recovery in demand from agrochemical sector, we expect a positive impact on performance in the second half of the current fiscal.
During the quarter, our Fluorochemicals division witnessed significant increase in domestic volumes of our HFC product portfolio, driven by heat waves and pricing of certain key refrigerants being firm in the domestic market. Additionally, demand for Dymel pharma propellant remained strong. U.S. market saw lower volumes for some refrigerants and pricing was also lower. On an overall basis, HFC volumes remained strong compared to corresponding period last year. However, we also witnessed certain challenges in the chloromethanes segment and pricing remained subdued for certain key products. Further, our newly established PTFE facility is gaining traction in the domestic markets with exports sampling also underway. The progress on value-added grades is also progressing as planned.
At SRF, we take pride in our exceptional R&D capabilities within the Indian chemical industry. Our team of over 450 skilled professionals is essential to developing advanced products and processes for our Specialty Chemicals and Fluorochemicals businesses. With expertise in handling complex chemistries, SRF is at the forefront of tackling challenging projects. Our strength in R&D is highlighted by our significant patent portfolio including 151 granted patents and 451 processed patents filed. Looking ahead, R&D will continue to drive SRF's pursuit of excellence, leading innovations in process development, scale up and commercialization of new chemistries, such as advanced intermediates, active agrochemical ingredients and next-generation refrigerants.
Coming to our Packaging Films business. We delivered 22% Y-o-Y growth, reaching INR 1,336 crores in Q1 FY '25. EBIT margins improved driven by record production levels and robust VAP sales. Margins for BOPP segment, Film segment improved benefiting from higher capacity utilization and stable demand. While the BOPET films also witnessed some positives towards the end of Q1, an oversupply situation and intense competition from Chinese players in Southeast Asia still persist in the BOPET segment. Despite the challenging conditions, SRF's value-added product portfolio, long-term customer contracts and an easy-to-do business with ability provided us a competitive edge, enabling us to maintain profitability and achieve industry-leading performance. In our recently established aluminum foil facility, export sampling is underway. We are focused on reaching optimal utilization levels soon and anticipate a ramp-up in production in H2.
Moving to our Technical Textile business segment. Revenue grew by 13% to INR 525 crores during the quarter with steady contributions from the Nylon Tyre Cord Fabric segment and Polyester Industrial Yarn segments, while demand for belting fabric softened. Our focus in the segment remains on enhancing higher margin value-added sales. We have also made notable progress in clean energy usage, achieving the highest share of renewable power during the quarter. Our commitment to renewable energy has led to a substantial portion of our energy mix being met through green sources. Additionally, expansion projects of dipping and BF capacities are advancing as planned.
Lastly, in our other segment, we reported steady growth in Coated and Laminated Fabric businesses. SRF maintained its leading position in the domestic coated fabric market by volume and price, achieving record domestic sales with strong seasonal demand anticipated. The business aims to boost profitability by increasing volumes -- by increasing domestic volumes through value-added products and expanding into new segments. In Laminated Fabrics, we retained price leadership with full capacity operations, although oversupply is pressuring margins.
Coming to our Fill and Profit initiative, the SRF Foundation established 9 Anganwadi centers in Netrang and Bharuch during the quarter in close vicinity of our chemicals and manufacturing facilities in Dahej. In Mewat, our foundation team led the opening event of a model Anganwadi center at Firozpur Mewat village with 140-plus community members attending. SRF has recently been honored with some prestigious awards. Our Chairman Emeritus, Mr. Arun Bharat Ram, received the Outstanding Contribution to Education and Skill Development award from Hurun India. SRF was recognized by Frost & Sullivan Institute with the 2024 Enlightened Growth Leadership Best Practices Award. Some other notable achievements are a part of our press release shared earlier.
In conclusion, over the years, SRF has built a resilient multi-business structure that produce -- positions us well to navigate a dynamic environment. Although some sectors may encounter near-term challenges, we are confident that our business model and an ever-expanding product profile will keep us in good stead as cycles turn. Overall growth and sustainable value for all stakeholders should be created.
On that note, I conclude my remarks and would be glad to discuss any questions, comments or suggestions that you may have. I would now like to ask the moderator to open the line for the Q&A session.
[Operator Instructions] The first question is from the line of Sanjay Jain from ICICI Securities.
I guess, firstly on the Specialty Chemicals side...
Sanjesh, can you be a little louder, please?
First one, on the Specialty Chemicals side, are we still holding on to our guidance of 20%? And we are confident that second half will make for all the shortfalls in the first half?
So Sanjesh, I have expected the question to be very frank about it. Given the fact that the overall chemicals business this quarter has been slightly lower, you also have to understand that when we were looking at it from a Q-on-Q perspective, Q1 last year was still very good. We started to witness some of the inventory rationalization and some of those positions coming through probably towards Q2 of last year. Again, Q2, Q3, Q4, all of those, we saw some negatives coming through in fact. Given that as a situation and the high base that we are with as of now, I think a 20% number is still very achievable. But again, I think the key element here also is the market, while we are also expecting some of the market positions that have played out during the first quarter now to be better going forward. With all of those factored in, I think we are still fairly confident of being able to get there.
Great, sir. One related question there. Are we anticipating any new AI launch in this year? Or that will be still work in progress for us and that's more like a FY '26 story?
Sanjesh, new AIs that we have spoken about, we have already sent out the sample. We've already sent out certain representative samples to some of the customers. As the registrations do come through, I think the commercial orders of those will start to flow. Again, while I can't give you the exact date when they will start to come in, fact is that the product approval is pretty much through. And therefore, as the registrations come in, we should see some traction on the new AIs also. At least two, I can tell you, have gone through. And there is work going on, on others as well.
Great, sir. One last question on the fluoro -- ref gas side, fluorocarbon, how do you expect U.S. volume for this year is worse behind for us in terms of volume and U.S. volumes from hereon should stabilize for us?
So when you will compare it to last year, certainly volumes will be lower from a U.S. market perspective. But again, Sanjesh, like I said during the start of this call, that the domestic market traction has really helped us. I think we have seen very significant volume increases in the domestic market as much as, in some cases, if not double, 60%, 70% increase in volumes. Like as we have also mentioned in the press release as well as I think in the presentation, the idea today is to continue to focus on production as much as we can. And that's the first price here, Sanjesh, to be very frank.
Volume has been positive. Overall volume, I would still say when I compare from CPLY are still positive. Although, again, to a certain extent, pricing has been lower. The drag on the chemicals business or the Fluorochemicals business also has been, to a certain extent, the chloromethane. The end product demand is kind of not significantly there, which is leading to some lower positioning creating there. I think some of that recovery should also happen and some positive traits on that should also come through, Sanjesh, but again, I would tend to think more towards H2.
The next question is from the line of Vivek Ramakrishnan from DSP Mutual Funds.
My question is around the continued CapEx and what kind of debt-to-EBITDA guidance or levels do you see going forward? And whether if the profitability does not come back, you can defer any of the CapEx plans?
Vivek, the way we look at CapEx this year, I think the overall CapEx number should be in the range of about INR 1,500 crores to INR 1,900 crores overall. With that as a number, my debt-to-EBITDA should still improve from what number we were at probably in FY '24. I don't see an issue in terms of saying that we have to defer CapEx for cash flow requirements. I think we still have a fairly strong balance sheet. We still have fairly good numbers in terms of what we are generating. In fact, I would still tend to think that if there is a need to do a higher CapEx even in a slightly lower cycle, I think we are in fairly good shape. FY '25 debt-to-EBITDA numbers, I think will certainly be lower than FY '24 numbers. So that's how we would look at it. If there is a profitable project that we can look at, certainly happy to take that forward.
I was just asking in the context of the very high credit rating that you had, but I hear you. All the best, sir.
The next question is from the line of Ankur Periwal from Axis Capital.
First question on the chemicals margin. We have seen a sharper decline year-on-year. Is it -- alluding to the earlier discussion during the earlier quarters, is it because of the pricing pressure in some of the product or any specific reason for the same?
So Ankur, two things I would say. If you look at our positions from FY '24 till now, I think a very large amount of CapEx that has been capitalized during -- both in the Specialty Chemical space as well as in the Fluorochemicals space. My rough sense is probably in the range of about -- sorry, INR 1,800 crores plus about INR 700 crores, so about INR 2,500 crores, INR 2,600 crores of CapEx that has been capitalized. So I would typically tend to say that when you look at margins on a quarter-by-quarter basis, there is some depreciation drag that is coming in. As some of these ramp up, there will be a positive change that we will start to see on the margin profile.
Like a chemical business, it will always take time to ramp up the chemical plant. Therefore, there is some negativity on this side. If you look at the year as a whole, EBIT margin for last year, we were probably in the range of about 25%, 26%. I can't tell you what number we will get at. But I think it should remain within this range, plus/minus 2% positive or negative from an annualized basis. I've always said that we should not look at margins on a quarter-on-quarter perspective. To answer the second part of your question, yes, there is a pricing drag also with respect to margins. But like I said in the earlier comment, there is certain pricing positions that are starting to improve, which should bode well for the future. Ankur?
Sure, sir. Just a follow-up on that. The tech interventions or the cost-cutting measures that you were alluding to, the benefit of that has already started coming in or it will be coming, let's say, Q2 or Q3 onwards?
They're not overnight measures. There is work that is going on. Some positives have already started to come in and some we will see continued over a period of time. So it's not a onetime overnight exercise. It's a journey in that sense.
Sure. That's helpful. And just a second bit here, on the CapEx plan, you did allude towards INR 18 billion to INR 19 billion for this year. If I'm not wrong, earlier, we were at INR 21 billion, INR 22 billion, of which INR 18 billion, INR 19 billion was Chemicals. So any specific project which has been deferred and how much of this will be going into Chemicals?
Ankur, whenever we talk about CapEx, there are no deferments that have happened. In fact, we are to be judicious about CapEx. We are -- whenever we talk about CapEx, we have always taken into account certain CapExes that will be announced during the financial year, and therefore, that number comes through. I don't think at any point in time, INR 100 crores plus or minus is too much of an issue. And again, I don't remember saying INR 21 billion, INR 22 billion as such. So I think the way we look at it is that what are the CapExes that are going on today. And what are the ones that are likely to get sanctioned. What I am saying is that we have deferred certain CapExes, not really.
Great. And the breakup of this among the Chemicals business here, for FY '25 that is?
We would tend to think that the majority is still on the fluoropolymer side. There is a capacitor grade film that is going on. So those are the two large ones [indiscernible] in the Specialty Chemicals space. So those are the large ones that are going on. Majority still remains chemicals. But yes, like we also said in the past, the amount of CapEx that gets incurred in the packaging is a large CapEx that gets incurred over a small period of time. So there could be some flips around it as such.
The next question is from the line of Surya Patra from PhillipCapital India Private Limited.
Sir, my first question is about the new project utilizations. Whether that would be -- whether the 7, 8-odd projects what we have commissioned in the Specialty Chemicals side, those started and those are commercial now and have achieved any specific kind of utilization rate, sir?
To be very frank about it, Surya, I think there is a lot of traction that has come through from our new projects. At least I can tell you in the revenue position here, let's say, some of the new products have done very, very well. It's not that the revenues from those could be in excess of about INR 150 crores to INR 200 crores as of quarter. So therefore, the ramp-up of these is also something that will come through overall during this year. So that's a positive. Obviously, some of the older products or the legacy products that we had, we've seen some decline. And therefore, we are very happy to share that because some of these new projects have done very well, we are in better shape. As the cycle turns for the older products also, I think there should be some positive traction on that side.
Okay. And sir, you mentioned about the pharma intermediate -- new pharma intermediate. So could you say whether it is an advanced intermediate or will it require regulatory clearance of the unit, all those kind of things? Or is it just intermediates...
Pharma intermediate, these are all non-actives. So we are not getting into an active pharma ingredients. So no regulatory approval required, Surya.
Okay. Just last one, sir, about the pricing aspect. See, you have also, in your opening remarks, indicated that the agri input prices remain softer only and the element of the China pressure also that you have highlighted in your presentation. So how do you see sir, see, in fact, while -- about the demand recovery of the industry is -- demand recovery, you are saying that second half possibly will see the kind of recovery. But are you hopeful about the price recovery as well simultaneously?
To be very frank, Surya, I think the end product demand is still very strong. The only question today is when we look at what is the customer really looking at from a medium-term perspective. Now there is the China pressure on pricing that is there. We are looking forward to some of the, let's say, volume pickup in some of the new products that we have. What happened on pricing is clearly out of our control to be very frank, Surya. And therefore, what we are wanting to look at is how much can we do both in terms of pricing, both in terms of volumes and cost measurement or cost positions that we are creating on that. I think those are the ones that are in our control, and therefore, we look at it from that perspective. Pricing really is a function of what markets are at any point in time. And I will say that negotiations with customers -- relationships with customers help us to be able to drive some better pricing also going forward.
In fact, the agrochemical input manufacturing or intermediate manufacturing by China has gone up over 50% over the last 2 quarter period. So hence, the concern that whether that will pose a threat to pricing trend also, recovery trend for the chemical, agrochemical as a whole. That is the question. So you're saying that, okay.
Fact of the matter is that you need to look at it with a more, let's say, how should I say this, a lens that typically we don't look at from. So to that extent, like I said, I think the answer remains the same. While our efforts will be to ensure we get better volume, we discuss that with customers, the positions that we are taking in terms of our costing should be better. I think those are the things that are in our control, which we want to look at rather than what the Chinese are doing in that sense.
The next question is from the line of Vivek Rajamani from Morgan Stanley.
On the first question, in terms of the second half pickup, would it be possible to give some sense in terms of whether it will be more driven by your expanded capacities? Or it's going to be a combination of both the expanded capacities as well as the underlying improvement in the overall demand sentiment?
You're talking about the Specialty Chemicals business, I assume, Vivek. So I think it will be a combination of both. Like I said to an earlier question, we've seen significant positives from new products that have come in. I think good revenue position. Those plants should ramp up over the next, let's say, 9 to 12 months. So that's a positive that should come in. Again, given where the situation of some of the older products are, I think there should be a pickup on those as well. When and how? Really, I don't know. That is something that only the markets will decide. But I think the way we are looking at it that the pickups in the new product plus the older products should give us enough ability to, let's say, grow this year overall.
Sure, sir. And just secondly, and it's a bit of a related question. You mentioned that the specific time of the recovery is clearly uncertain. Just wanted to get a sense in terms of the conversations that you're having with your customers, do you get a sense that this uncertainty is more focused on 2024? And as we look into 2025, we're actually a bit more confident? Or do you get a sense that it's still very, very dynamic given into 2025?
To be very frank, I think it is still very dynamic. Given where, let's say, the Chinese are, where some of the products are, in the older product, this is how it is playing out. Customers are willing to look at medium-term contracts. But I mean, with the current pricing, I may not be willing to look at that kind of literally. So it's a, how should I say it, song and dance that's playing on. And we have to also be very cognizant of how we really take it forward. So as of now, the pick up seems slow, but we are fairly hopeful given where discussions are that we should be in good shape going forward.
The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance.
Sir, just first question is on the six AIs that you have talked about. If you can bifurcate them into generic and special or patented, and the purpose is that any of the generic AIs, have we seen or do we have to rework the economics? Or is it in any way impacting or will probably impact the margins? So what was the economics, say, 6 months back or 9 months back versus what is today because of the pricing pressure globally?
So even I think the discussions that are going on, Keyur, are largely with global majors, which are for either, say, generic or their patented products. So that's how it is. To be able to give you color on whether I have to rework the mechanics of it, really very difficult to say, Keyur. I'll have to go back to the business and see if there is something on that side, but I don't think it is. I think the way it is structured for us today is that some of these newer products or newer AIs are samples [Technical Difficulty]. Customers are now looking at the timing of their registration. And once they launch the final product, I think the PO should come through. So that's how it is structured, Keyur. I don't think there is a need to work out -- let's say, there is a need to revise working of this. But again, like I said, the cost focus remains. We will continue to focus on cost as well and create, let's say, a positive margin impact going forward.
So all of them are -- fall in the patented category?
Again, I think it is unfair for me to be able to say that all are there. But the largest discussions that are happening are with global majors. So that's what I feel. But I'll have to probably come back to you in terms of a specific answer to that question.
Okay. And the second question is, so the -- I mean, the possible impact of these AIs and their repricing, if any, and the shift of ref gas volumes away from U.S. probably to India and to other geographies in Asia or Middle East...
Keyur, we're not able to hear you well. Could you just pick up the handset and talk because your voice is a bit muffled.
Is it better?
Slightly. And if you could just please speak a bit slower.
Okay. So in ref gas, the shift of geography from U.S. to, say, India and other export geographies, so considering that you are -- so you are confident of what your margin range that you give for the entire segment that includes chemical and ref gas, both. So basically the final question was, with any repricing, if any, in this AIs, and shift of geography in ref gas away from U.S., are they factored in when you say guidance of around 25%, 26%?
So again, when I said that, I think it takes all of that into account, Keyur. The only point to note is I think there are 2 different points that you are trying to make here. What I am saying is that when you look at it from a ref gas perspective, HFC, the idea today is to try and do as much production as you can, given where the position or quotas are, right? So that is something that continues, which is for calendar '24, '25, '26. For the Specialty Chemicals, yes, as the new plants ramp up, there should be an operating leverage positive that should also play out, which would give us positive traction on the margin side.
The next question is from the line of Rohan Gupta from Nuvama.
First, once again, question is on your CapEx plan. You mentioned roughly INR 1,500 crores to INR 1,900 crores for the current year. Sir, I think 1.5 years back almost when our Chairman gave an outlook of almost investing INR 12,000 crores to INR 15,000 crores CapEx overall next 4 to 5 years, just wanted to check that there -- this kind of number because this is significantly lower than what we had invested last year. So is there any long-term changes are happening, or is it just on the -- in the current year, we are going with the lower CapEx, given the weakness in the industry environment in chemicals and we'll pick up from the next year once again?
So I think this is a question that was typically also asked last quarter when we were kind of talking about the CapEx number going forward. Rohan, I think given where the environment is today, we are not significantly lowering the number. We have just said that the INR 12,000 crore to INR 15,000 crore number that we had talked about for a 5-year period was probably will get done over a 6-year period now. I think that's the position that is there today also. Like I said to an earlier question -- answer to an earlier question also, Rohan, we are not looking at curtailing any CapExes, but we are also wanting to be judicious about the money that we are spending. Therefore, the amount that have been spent in last year, we are looking to ensure that we do a good job in terms of juicing those assets going forward. As that happens, CapEx is not a problem. We will keep doing more CapEx in the Chemicals business because that's essentially the strategic plan going forward as well in terms of where the company will invest and mostly in the Chemicals business. So that's how I should work out, Rohan.
Okay. Sir, second question is on your growth outlook. You mentioned that in Specialty Chemicals, you still not deny that a 20% kind of growth opportunity and even in EBIT margins also, sir, despite the current quarter being roughly closer to 20% EBIT margin. You are still looking at that it maybe 200 basis points here and there from the last year, which was 25.5% to 26%. So what kind of optimism -- I mean you are looking in a business, which is still keeping you intact that you may still achieve those kind of numbers while in a near 1 quarter, 2 quarters, one quarter has already gone, and you are still mentioning that the agrochemical global inventory situation is still good only. So what is holding on from, I mean, giving or what is -- the optimism which you are building in that how the scenario in the second half will become so rosy that you can go to 20% kind of Specialty Chemicals growth. For that, we need to have a significant growth number in H2 and even at the margin front also. So I'm just looking that what is the -- which was seen that can drive a second half growth so drastically.
Rohan, very long question. Let me try and answer it in one line. I think we've said this earlier also. You've seen some seasonality going on in the business. H2 for Specialty Chemicals business has always been heavier than H1. That's the procurement pattern that's globally there. That's what we have seen over time as well. You've always seen H2 being better for us when we compare to H1. To that extent, I think we are fairly confident that some of these will come through. It's a dynamic environment today. The markets are a bit volatile. Customers are going through an inventory challenge that's being met. All of those -- given all of those that are happening, we are still launching new products on a continuous basis. New products are showing good traction going forward as well.
I think all of those put together, that's where we are in terms of the overall growth versus margin position. I have always said, Rohan, that we should not look at it from a quarter-on-quarter margin. There are various things that play out during a quarter. When you look at it from an annualized perspective, I still think the position that we've taken are still fairly achievable. Where and how that will be achieved from? I can't give you the numbers on sales and targets around it. That's pretty impossible to do.
The next question is from the line of Abhijit Akella from Kotak Securities.
Sir, two questions from my side. First one on Packaging Films. So we've seen about INR 150-odd crore sequential increase in revenues in that segment. First, just to understand whether we should sort of assume that most of it has come from pricing on a sequential basis? And if so, the segment EBIT has gone up by only about INR 50-odd crores, even if the revenues have come largely from pricing. So sort of just trying to understand whether there is any increased expenses in any form in that segment. So that is one.
I think not really. I think there is -- when we look at the overall production from an SRF perspective, I think we are still doing very well. And when we look at juicing the same assets, creating more value out of the same asset, I think the number that we are now doing are better than last year. So let's say, our pack production this quarter has been higher than sequentially, let's say, Q4 last year. So that's a positive. From a Hungary perspective, again, I think the utilization levels have become better. And therefore, that's another positive that has got added. Yes, to a certain extent, there has been a pricing policy that has also been factored in from a sequential revenue growth number. But it is not just pricing is what I can tell you.
Okay. So volumes have also gone up sequentially, is it?
Yes, please. And yes, BOPP has been a positive.
Okay, sir. Second one was just on the HF plant capacity, which is alluded to in the investor presentation. So if you could please just share some color around that, what's the capacity there? And like how much are we buying from outside today in terms of HF? And how much will this help us sort of save -- or how much of a production will it basically help us make in-house going forward?
Again, I think I'd like to check up in terms of the overall capacity on the HF, I'll come back to you. My sense is that the way the HF is structured today, the overall HF requirement from the existing 32 or 134a or other requirements that we have in the specialty chemicals business, the new HF plant should take care of all of those. To a certain extent, certain, let's say, bottlenecks that we face in terms of overall production were because of the HF availability. As that plant comes on stream, I think there should be some positives on that side that should come up. But the exact number, I'll come back to you, Abhijit.
[Operator Instructions] The next question is from the line of Siddharth Gadekar from Equirus.
Just on the R32 capacity, which we commissioned last year, can you give us some sense on the utilization levels? And how should we see through this calendar year?
So again, I think we have to look at it from an annual perspective, Siddharth. I think the plant has been commissioned early last quarter. That's probably December end is when it was commissioned. So of the availability, the market demand, that has to be looked at. From an annualized perspective, I think we are targeting getting 70%, 75% on the overall available capacity on the 32. I think that should be the one that you should look at rather than from a Q1 perspective because relatively, the value that comes out of pure Q1 number is not really great. What I can tell you, and I think I alluded to it in the earlier part of it, domestic volumes for HFCs have grown significantly. And I think to a certain extent, a large part of the 32 available capacity that was there is pretty much utilized. Our endeavor is to continue to enhance production from it, given various regulatory positions around it.
So I wanted to get from an annualized perspective that will we be reaching the 30,000 tonnes so we get eligible for the entire quota beyond CY '26? So how should we look at it from a quota perspective for the annualized number?
Again, I don't think I will be able to give that because the endeavor is to continue to produce. Quota is not just for calendar '24. It is the next 3 years. So unfortunately, I can't give you that information as such.
The next question is from the line of Vishnu Kumar from Avendus Spark.
Sir, in terms of our order to execution and delivery, do you think, let's say, the lead time is probably anywhere between 1 to 3 months? Current conversations is...
One minute, sir. Could you be slightly slower. I'm unable to understand what you are saying.
In terms of the conversations with the innovators and the dispatch schedule that probably from getting the order and to kind of delivering, what would be the time line? And the second half recovery we are saying is because we have -- our order flow is likely to be much better. Is that the takeaway that we have to take?
So the price schedule will depend on various -- production planning and various other things around it, Vishnu. Depending upon what we have discussed with the customer, whether you can produce it or you have an inventory of those products available to be decided, that really determines the dispatch schedule. It's not an overnight situation where we can send it, what is dispatch schedule for certain products. It is typically based on conversations with the customers. The second question was something that I missed, could you just repeat that?
My question was, given the dispatch schedule, I mean the second half recovery in growth, is it because the volume -- we are visibly seeing that the order flow in terms of volumes are likely to be higher to the customers based on the conversations that we have had and the likely dispatch schedule, or we still need to cross 1 month, 1.5 months to get to a better clarity on second half?
So again, I think there is already certain discussions that are positive. There are certain orders that are to be dispatched in H2, and those orders have been confirmed. From a Specialty Chemicals business perspective, certain orders are there, which are contracted with the customers. We have to get a schedule from them for the dispatch. We will do the production planning appropriately and then do certain things. But let's say, when we look at it from an overall perspective, right, the visibility that is there is probably in the range of about 75%, 80% rather than being 120%. So that's how I would really look at it.
Understood, sir. And my second question is on the pricing. I mean last 3, 4 years, you've come full cycle from where -- in general on the agrichemical pricing 2019, '20, '21, I mean '22, '23, it was very high and now it has come back down. So structurally, even for our products, should we see that even if the recovery were to happen and the industry were to recover, would pricing not be as what it was in '22, '23? And hence, where would our margin in this business be even if the recovery were to come back?
So again, Vishnu, like I said to an earlier question, what we are looking to do is manage our costs well, look at populating our plants that we have in place and ensuring volumes come through. Pricing typically is something that we can't control. And therefore, what we are looking to control is what we can actually. So cost, various elements around it is something that we will continue to look at. If the pricing does come out to be a positive, we will certainly see positive traction on that side. But typically, in these situations also, you can't really control the entire price. There are negotiations with customers that happen.
There are, let's say, certain key products, new products, pricing has not been a challenge. We have seen that as a positive coming through. Our focus on new products in the Specialty Chemicals space has been reaping good results. I think I've said all of that earlier as well. In the fluorochemical space, again, like I said, currently, the idea is to produce as much as we can. And obviously, given where the current markets are, pricing seems to be a positive trend. That's how we would really look at it, Vishnu.
The next question is from the line of Krishan Parwani from JM Financial.
Just two clarifications from my side. So the first is, I think in your previous comments, you mentioned CapEx for PTFE. Can you please highlight how much additional CapEx that you would incur for PTFE in '25? And what will be your asset base for PTFE?
No, no, I never said PTFE, maybe you got confused. It was for the new fluoropolymers, the three new fluoropolymers. I think the numbers are already out in terms of the total cost that we are incurring on that, and it's probably in the range of INR 600 crores or so. So that's how it is, the total amount that is to be incurred. Those projects probably come online in a phased manner, but, let's say, by Q2 FY '26 -- sorry, it will probably be slightly later than that, November of '25, December of '25. So Q2 FY -- Q3 FY '26 is when these start to come online, but probably in a phased manner.
Noted. So it's on the X of PTFE. And what's your current asset base for PTFE if you could highlight that?
Roughly speaking, PTFE project was capitalized at about -- I don't remember it exactly. Let me just check the number, so roughly about INR 490 crores, INR 500 crores.
Understood. That's an asset base, right?
The next question is from the line of Surya Patra from PhillipCapital India Private Limited.
Just one follow-up, sir. Could you say some idea what is the stage of the operation of this aluminum foil project and the PTFE in terms of utilization and progress?
Surya, both are new products for us. I think there is a longer learning curve that we had initially anticipated. Aluminum foil, what we believe is, again, ramp-up in H2. The sample of the product for the European customers and certain export customers have already been sent. They should start to convert into orders probably towards the end of Q2. Similar, I think is with PTFE. The basic grade, which is the suspension grade, we've already kind of established and we are exporting free flow and fine cut. I think to a certain extent, domestic market, we are already starting to sell. Samples for the export market has already been sent out. Hopefully, again, H2 should see some traction on that.
The next question is from the line of Nasir Hussain from Fintrek Research Advisors Private Limited.
So my question is that in HFC, what is the product or blend that we are pushing to our customers? And how competitive is this product or blend against Chinese manufacturers?
No, I didn't get the question. What product are you talking about?
In HFCs, what is the product or blend that we are selling to -- pushing to our customers?
We have three basic gases that are there. The R32, R134a and 125. Various blends of these are also produced. These are also, let's say, either a blend of two of the HFCs or all three of the HFCs depending upon the refrigeration requirement. So to that extent, we are selling all of these to our local as well as global customers depending on their requirement. Your question with respect to the competitive to China, I think we are a company that has all of the backward integration around it. And because of that, we have a fairly decent cost structure on all of these. So fairly complicated in that sense. I hope that answers, Nasir.
Yes. I had just another question. So because of the U.S. quota, we were expanding into the Middle East and Southeast Asia geographies, right, as of last quarter. So how is -- what is the status of these geographical expansion? And have we recognized any revenue in Middle East or Southeast Asia markets?
So to be very frank, Middle East has always been a big market for us. We have been selling to that market. On an overall basis, like I said, our Q-on-Q corresponding period last year, volumes of HFC has seen significant growth to a certain extent because we had the product R32, but also because we've been able to proliferate it in both the local markets and the global market -- and our key export markets as well. When I look at it from a percentage perspective, I think even the export market volume, we expanded by about 9% to 10%.
So how much revenue are we generating now from our exports on HFC?
We don't give the revenue breakup from a domestic or export perspective.
Yes, could you give that breakup?
No, I don't give that breakup, please.
The next question is from the line of Dhruv Muchhal from HDFC AMC.
Sir, the question is that we are seeing that freight rates have increased significantly. So this time, R&D...
Go slow.
The freight rates have increased significantly. So this time, aren't you seeing the prebuying that last time that same thing happened is happening this time around? And if not, why is that...
You are talking about freight rates?
Yes, freight rates, container freight rates have increased significantly. So last time we saw that there was a lot of prebuying. But this time, it seems that's not happening. So just wanted to understand how do you read this? And why I'm asking this is because at least in U.S. and Europe, market reports say that most of the inventory destocking is largely done and inventories are thin, it is only about demand growth now. So given that situation, why is that prebuying not happening this time around?
You are talking HFCs?
No, sir, for spec chem, for general ag chem products.
So then to be very frank, two things. Freight rate had gone up. What we had seen, challenges were essentially around freight rates that were more from a packaging film perspective. And to a certain extent, our export volumes were slightly lower because freight rates went through the roof. Some of those freight rates have started to come down also. And therefore, we should be able to do more exports going forward on the packaging film side. I don't think we saw very large challenges because of freight rate in the chemicals business overall. Some of our contracts with customers are also at factory. So really, some of those don't matter to us.
The point to make, Dhruv, is that while there is some elasticity on that, it is not perfectly lasting with freight rates in terms of prebuying that happened. I don't have a data point in terms of whether it was happening last time and why it is not happening this time. So I'm not really able to comment on that.
I'm asking because when the freight rates are higher, that means availability is a concern and people are uncertain about the availability in the future. And so they start prebuying...
Freight rates higher could also be because of certain disruptions in supply chain, in shipping routes, Red Sea issue, the Middle East issue. So there could be various reasons for freight rate hike. It is not necessarily just because of demand and supply.
Got it. And sir, secondly, you don't give this generally, but in your chemical business, this time, as you said, the margin impact is also because of the unabsorbed depreciation. If possible, if you can give the EBITDA number for Q4 and Q1?
Again, we only share the numbers that are required regulatory. We don't go out and do the EBITDA number. On a company as a whole basis, you can still calculate the number.
Yes. But for the quarter, it becomes a bit difficult given the capitalization that would have happened. So it would make more -- I mean, make it more readable, otherwise the impact seems accentuated. So that's the reason. But whatever is comfortable.
Like I said, I think the drag on this is roughly about 1.7% to 1.8% on the chemical business, right, in terms of what margin we have posted versus what we should have, if that higher depreciation would not have been there.
So Q-o-Q decline would have only been about 2-odd percent, 1.5% to 2%.
Yes, Q versus annual.
The next question is from the line of Rohan Gupta from Nuvama.
Sir, on this pharma intermediates, so we mentioned that last year that now over next 2 to 3 years, we are expecting the pharma business contribution to go up to maybe 20% plus kind of number. We were expecting a significant pickup and a lot of work has already been done in pharma. Just wanted to get some update on that, how that part of the business is picking up?
I think the couple of products have shown decent traction, Rohan. I think even in the Q1 number, our pharma overall number is higher, but these are also to a certain extent batched out. So as we see more regular orders on some of these, we will probably see some positive traction. But yes, two products have seen very good traction in Q1.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing remarks.
Thank you, everyone. I hope that we have been able to answer some of your questions. I wish that each one of you remains safe and healthy. If you have any further questions, we would be happy to be of assistance. We hope to have your valuable support on a continued basis as we move ahead. On behalf of the management, I once again thank you for taking time to join us on this call. Bye-bye.
On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.