The Chartians

After the dream bull run of chemicals ended in 2021 majority of the chemical stock went down by 40-50% and some haven't delivered any returns for almost 3 years starting 2022. SRF's performance has shown severe decline with no signs of recovery which also reflects in stock price. The overall chemical space has been in dust due to global fluctuation in chemical prices, lack of demand and other factors relating to the industry overall.

SRF Ltd. has recently experienced a notable surge in its stock price, with increases of over 10% in January 2025, primarily driven by rising global refrigerant gas prices and strong market performance. The significant increase in prices for refrigerant gases, particularly R32 and R125, supply constraints in the HVAC sector are pushing prices higher, benefiting producers like SRF. New environmental regulations, such as the EU's F-gas regulation implemented in March 2024, aim to phase out hydrofluorocarbons (HFCs) due to their high Global Warming Potential (GWP). This has caused prices of conventional refrigerants to increase by up to 1000% since 2014. In contrast, natural alternatives like propane (R290) and carbon dioxide (R744) have maintained stable and lower prices.

On January 9, 2025, SRF's stock surged by nearly 14% to ₹2679 based on this trigger, as SRF has a good chunk of business here. SRF produces refrigerant gases (R22, HFC blends), Chloromethanes, Intermediates for Specialty Chemicals, Hydrofluoric Acid, PTFEs, Fluoropolymers, etc With the current tight supply of refrigerants like R32 and R125, SRF is well-positioned to meet the rising demand. The company has an annual production capacity of approximately 29,000 to 30,000 tons of R32 and around 7,000 tons of R125. As prices for these refrigerants increase due to supply shortages, SRF stands to benefit from heightened demand, which could lead to increased production output to capitalize on favorable pricing conditions.

SRF's transition towards more sustainable refrigerants aligns with global environmental goals, enhancing its competitive edge. As regulations phase out ozone-depleting substances, the demand for alternatives like R32 is expected to grow. For example : $1/kg increase in the price of R32, SRF's EBITDA could rise by approximately ₹260 crore, while a similar increase in R125 prices could contribute an additional ₹60 crore to its EBITDA. SRF's chemicals business, which encompasses refrigerants like R32, contributes approximately 48-50% of the company's total revenue. The global R32 market is projected to grow significantly, with estimates suggesting it could reach approximately USD 13.03 billion by 2032, growing at a CAGR of 7.40% from 2025 to 2032. This growth trajectory presents opportunities for SRF to expand its market share and revenue from R32 as demand increases.

This can be a big opportunity for #SRF but will depend on how it’s executable. Moreover we are interested in the price action of SRF and this is just an additional trigger for any upcoming opportunity. Currently we are seeing a potential EP trade in SRF so lets have a look at the chart below….

#SRF 2600 : Potential EP based on global refrigerator gas price hike. For Trades join FREE community of 60,000+ people : http://telegram.me/chartians