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Navin Fluorine International - Muted performance - HDFC Securities

Posted On: 2021-10-23 09:04:14 (Time Zone: IST)


Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities and Mr. Harshad Katkar, Institutional Research Analyst, HDFC Securities

We retain our ADD rating on NFIL with a target price of INR 4,025 on the back of (1) earnings visibility, given long-term contracts, and (2) tilt in sales mix towards high-margin high-value business. EBITDA/APAT were 7/8% above our estimates, owing to lower-than-expected raw material costs, higher- than-expected other income, offset by a higher-than-expected opex and depreciation.

Financial performance: Revenue grew 5/3% YoY/QoQ to INR 3,244mn. EBITDA fell 11% YoY, and grew 7% QoQ to INR 835mn in Q2 with EBITDA margin coming in at ~26% (-463/+90bps YoY/QoQ). The margin was impacted negatively on a YoY basis, owing to higher raw material costs, increased employee cost, higher maintenance expenses, and elevated freight cost.

Segmental performance: Speciality chemicals (38% of revenue mix) grew 20% YoY to INR 1,220mn on the back of increased exports. Two new products were launched in the speciality chemicals business unit (BU) - one catering to the agrochemical sector, and the other to speciality materials sector. CRAMS BU (25% of revenue mix) de-grew 17% YoY to 820mn, owing to a higher base, as a substantial part of the realisation of revenue of Q1FY21 had spilled over to Q2FY21. CRAMS BU continues to perform well, owing to repeat orders from its existing customers and encouraging new enquiries. NFIL plans to debottleneck its cGMP-3 plant by this year end, post which, it plans to set up a cGMP-4 plant. The high performance product (HPP) plant shall commence supplies in Q4FY22 or Q1FY23 and the multi-purpose plant (MPP) capacity would come on stream in H1FY23, both of which would drive future growth.

Exceptional items adjustment: Marked-to-market gains of INR 11mn have been excluded to arrive at an APAT of INR 610mn in Q2.

Change in estimates: We cut our FY22/23/24 EPS estimate by 12.5/11.6/10.5% to INR 50.4/67.6/89.5 to account for a lower other income assumption and to factor in the overall performance in H1FY22.

DCF-based valuation: Our target price is INR 4,025 (WACC 10%, terminal growth 5.5%). The stock is trading at 39.5x FY24E EPS.

Shares of Navin Fluorine International Limited was last trading in BSE at Rs. 3350.55 as compared to the previous close of Rs. 3365.15. The total number of shares traded during the day was 44925 in over 5036 trades.

The stock hit an intraday high of Rs. 3462.00 and intraday low of 3248.60. The net turnover during the day was Rs. 148511114.00.


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