Navin Fluorine International: Dahej Site is well planned for needs ahead

24 Apr 2023 , 11:41 AM

Recommendation: Reduce

Target Price: Rs 4,040

The company through its wholly owned subsidiary is in the midst of investing ~Rs 18.0 billion capex. Of this, ~Rs 7.6 billion capex has already got commissioned while Rs 5.4 billion capex is on track to get commissioned by the end of CY23. The recently approved capex of Rs 4.5 billion for AHF would be getting commissioned in around 18 months from now.

HPP ramping up well

In HFO, the company had signed a 7-year supply contract and had to incur Rs 4.4 billion capex. However, management has now pegged the revenue potential at Rs 5-5.5 billion. The company intends to take Board approval for de-bottlenecking HPP by 20-25% (would take around 9-10 months). It also has plans to set up Phase 2 capacity that would take around 18 months to be set up and would entail much lower capex than Phase 1.

CDMO to scale-up as well

In CDMO, the company aims to achieve US$100 million revenue target by FY27, if not FY26. The company remains bullish on attaining company-level EBITDA margins of around 30% in next three to four years, as the contribution from value added products increases.

New AHF plant will tap growth opportunities

AHF facility at Surat is fully utilized, and hence the need for setting up 40KTPA AHF plant at Dahej. The company has plans to utilize AHF at it Surat plant for other growth avenues (fluoropolymers and alike) once Dahej has its own AHF plant.

Tad change in FY24-25 estimates

Analysts at IIFL Capital Services have slightly tweaked their FY24-25 EPS estimates by 3-2%, higher revenue from HFO at Rs 5-5.5 billion and also upward revision in CDMO revenue, This is due to the management guidance for US$100 million revenue by FY26. Analysts at IIFL Capital Services have maintained their Reduce recommendation on the stock as they continue to believe that at 49x/32x FY24/25 estimated P/E, valuations are very rich and factor in the traction in earnings from upcoming projects; thereby leaving no room for disappointments.