SRF profit rises 31% YoY, but margin drops sharply sequentially
Expenses grew faster than revenue in both comparisons, while the tax rate fell 0.79 percentage points year on year.
Filed 21 Oct 2026, 14:54 IST · SRF Ltd (SRF)
Key takeaways
- Consolidated operating margin fell 5.28 percentage points QoQ to 19.29% as expenses rose 4.26% while revenue declined 2.56%.
- Revenue grew 34.72% YoY, but expenses grew faster at 38.11%, limiting operating-profit growth to 22.18%.
- The stock fell 5.22% on the results day, a larger move than its 2.86% median absolute reaction after the past eight results.
Price around the results
QoQ profit reversal despite annual growth
Consolidated revenue declined 2.56% QoQ, while operating profit fell 23.52% and net profit fell 32.91%. The YoY comparison was stronger: revenue increased 34.72% and net profit 31.16%, although profit growth lagged revenue growth. Other income contributed only 3.72% of pre-tax profit, so the quarter's earnings were mainly operating in nature.
Higher costs drove the margin squeeze
Expenses rose 4.26% QoQ even as revenue fell 2.56%, narrowing operating margin by 5.28 percentage points. YoY, expenses also grew faster than revenue—38.11% versus 34.72%—cutting margin by 1.98 percentage points. The YoY tax rate fell 0.79 percentage points, which supported net-profit growth, while the QoQ tax rate increased 1.63 percentage points.
Margin reverses after two quarterly gains
Operating margin had risen from 21.01% in Q3FY26 to 22.22% in Q4FY26 and 24.57% in Q1FY27 before falling to 19.29% this quarter. Despite the decline, SRF remained 1.99 percentage points above the 17.30% median operating margin among 10 reported Commodities peers.
Management points to US softness and expansion projects
Management said softness in the US market was partly offset by expansion in new markets, while specialty chemicals faced higher input and fuel costs. The company said environmental clearance had been received for the next-generation HFO project, which it expects to capitalise in Q4 FY28. Management also said the battery-application aluminium foil project had board approval with a 23-month implementation timeline, while the EHF semiconductor and FEP projects are scheduled for capitalisation in Q3 FY28 and Q1 FY28.
Market reaction was larger than SRF's usual move
SRF fell 5.22% on the results day, with a relative return of -4.88%; the move extended to -4.17% on the next trading day. Its past eight result reactions were evenly split between four rises and four falls, with a median absolute move of 2.86%, making this decline larger than its usual reaction.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹4,904 cr | ₹5,033 cr | -2.56% | +34.72% |
| Other income | ₹25 cr | ₹34 cr | -26.45% | -2.99% |
| Expenses | ₹3,958 cr | ₹3,797 cr | +4.26% | +38.11% |
| Operating profit | ₹946 cr | ₹1,237 cr | -23.52% | +22.18% |
| Operating margin (%) | 19.29% | 24.57% | — | — |
| Interest | ₹71 cr | ₹69 cr | +3.38% | +0.37% |
| Depreciation | ₹229 cr | ₹223 cr | +2.68% | +7.88% |
| Profit before tax | ₹671 cr | ₹979 cr | -31.47% | +29.78% |
| Tax | ₹162 cr | ₹220 cr | -26.49% | +25.65% |
| Net profit | ₹509 cr | ₹759 cr | -32.91% | +31.16% |
| EPS (₹) | ₹17.18 | ₹25.60 | -32.89% | +31.15% |
Operating margin of 19.29% compares with a Commodities sector median of 17.30% across 10 peers that have reported Q2FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -5.22% | -4.88% |
| Next session | -4.17% | — |
Volume on the results session was 3.85× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
Guidance & outlook
- The next-generation HFO project is on track for capitalization in Q4 FY28 after receiving environmental clearance.
Expansion
- The next-generation HFO capex is progressing as planned, with key regulatory approvals secured.
- The battery-application aluminium foil project received board approval in October 2026 and has a 23-month implementation timeline.
- The EHF semiconductor project has site work underway and is scheduled for capitalization in Q3 FY28.
- The FEP electrical and electronics project is scheduled for capitalization in Q1 FY28.
New initiatives
- The company is developing products for niche applications in emerging and sunrise sectors.
- The company is expanding into higher-value energy-storage applications as a new growth platform.
- The company is developing aluminium foil for battery applications, including battery energy storage systems and electric mobility.
Problems & risks
- Softness in the US market was partly offset by aggressive expansion in new markets.
- Specialty chemicals faced higher input and fuel costs.
What to watch
- Whether operating margin recovers from 19.29% after the 5.28-percentage-point QoQ decline.
- Whether expenses continue to grow faster than revenue after rising 4.26% QoQ against a 2.56% revenue decline.
- Updates on the next-generation HFO project targeted for capitalisation in Q4 FY28 and the EHF project scheduled for Q3 FY28.