RESULTS REVIEW 2QFY16

29 OCT 2015

Navin Fluorine International

BUY
INDUSTRY

CHEMICALS

CMP (as on 29 Oct 2015) Rs 1,579

Target Price

Rs 1,800

Nifty

8,112

Sensex

26,838

KEY STOCK DATA

Bloomberg

NFIL IN

No. of Shares (mn)

10

MCap (Rs bn) / ($ mn)

15/237

6m avg traded value (Rs mn)

21

STOCK PERFORMANCE (%)

52 Week high / low

Rs 1,661/501
3M

6M

12M

Absolute (%)

35.7

87.2

164.1

Relative (%)

38.4

88.6

165.1

SHAREHOLDING PATTERN (%)

Promoters

38.76

FIs & Local MFs

16.96

FIIs
Public & Others
Source : BSE

Satish Mishra
satish.mishra@hdfcsec.com
+91-22-6171-7334
Deepak Kolhe
deepak.kolhe@hdfcsec.com
+91-22-6171-7316

7.64
36.64

The game is yet to begin

Navin Fluorine (NFIL) reported stellar results with
EBITDA growing at 129% YoY to Rs 317mn and PAT at
Rs 232mn (+131% YoY). This was mainly because of
higher realisation for R22 and better product mix in
specialty chemicals.
Pickup in R22 prices is led by (1) The government
banning the import of pre-filled cylinders, which
pushed up demand from OEMs, and (2) 10% cut in
domestic output of R22 in 2015 under the Montreal
Protocol.
However, the big story for NFIL is yet to play out. The
second round of capex for adding CRAMS capacity
and a JV with Piramal Enterprises is near completion.
We expect the share of specialty to rise to ~70% by
FY18E vs. 50% in FY15. NFIL remains a net cash
company even at the peak of its capex cycle and we
expect FCF to turn positive from FY17E.
Robust growth, improving return ratios and a strong
B/S will drive re-rating. Maintain BUY with a TP of Rs
1,800/sh (16x 12 months rolling forward EPS).

Highlights of the quarter

Growth in revenues: Revenues grew across all

segments, except inorganic fluorides; refrigerant
(+44% YoY), specialty chemicals (+20%), CRAMS
(+150%) and inorganic fluorides (-21%).

Robust growth: Jump in profits will be led by (1)

Additional specialty capacity at Dewas, MP, which
will start production from 2HFY16, and (2) JV with
Piramal Enterprise to begin output from 4QFY16.

Revenues are likely to grow 20% over FY15-18E,

whereas EBITDA and PAT will register a CAGR of
35% and 32%, respectively.

Improving financials: Core RoCE and RoE are likely

to increase to 15.5% and 16.8% by FY18E from
7.5/9.5% in FY15.

Risks: (1) Execution risk for new molecules, (2)

Volatility in currency, and (3) Margin pressure in
commodity business because of China weakness.

Financial Summary (Consolidated)

(Rs mn)
Net Sales
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)

2QFY16* 2QFY15* YoY (%) 1QFY15*

1,511
1,242
21.7
1,504
317
139
128.6
256
232
101
130.5
181
23.8
10.3
130.5
18.6

QoQ (%)
0.5
23.9
28.0
27.9

FY14
4,862
660
568
58.2
27.1
21.7
10.7

FY15
5,915
722
546
55.9
28.3
21.1
9.5

FY16E
6,826
967
733
75.0
21.0
16.1
12.0

FY17E FY18E
8,478 10,305
1,340 1,787
945 1,252
96.8 128.2
16.3
12.3
11.6
8.4
14.1
16.8

Source: Company, HDFC sec Inst Research, * standalone

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

NAVIN FLUORINE: RESULTS REVIEW 2QFY16

Quarterly Financials Snapshot (Standalone)

Growth in revenues was led by
higher R22 prices and robust
growth in specialty/CRAMS

(Rs mn)
Net Sales
Material Expenses
Traded Goods
Employee Expenses
Other Operating Expenses
EBITDA
Depreciation
Other Income
PBIT
Interest Cost
PBT
Tax
RPAT
APAT
AEPS (Rs/sh)

2QFY16
1,511
620
13
154
408
317
46
89
360
8
352
119
232
232
23.8

2QFY15
1,242
565
21
139
378
139
44
57
152
9
143
42
101
101
10.3

YoY (%)
21.7
9.6
-40.0
11.3
7.8
128.6
4.8
55.6
137.0
-7.7
145.7
182.1
130.5
130.5
130.5

1QFY16
1,504
702
9
161
376
256
45
41
251
5
246
65
181
181
18.6

QoQ (%)
0.5
-11.7
35.6
-4.0
8.4
23.9
2.0
117.6
43.0
59.8
42.7
83.4
28.0
28.0
27.9

2QFY16
41.8
10.2
27.0
21.0
23.8
15.4
33.9

2QFY15
47.2
11.2
30.5
11.2
12.2
8.1
29.5

YoY (bps)
(538)
(95)
(348)
981
1,158
726
438

1QFY16
47.3
10.7
25.0
17.0
16.7
12.1
26.4

QoQ (bps)
(544)
(47)
196
396
707
331
754

2QFY16
520
220
660
100

2QFY15
360
280
550
40

YoY (%)
44.4
(21.4)
20.0
150.0

1QFY16
610
240
550
100

QoQ (%)
(14.8)
(8.3)
20.0
-

Source: Company, HDFC sec Inst Research

Margin Analysis

NFIL maintained the higher

margins led by improvement in
gross margins

Material Expenses as % of Net Sales

Employee Expenses as % of Net Sales
Other Expenses as % of Net Sales
EBITDA Margin (%)
EBIT Margin (%)
Net Profit Margin (%)
Tax Rate (%)

Segmental Revenues Analysis

(Rs mn)
Refrigerants
Inorganic Fluorides
Specialty Chemicals
CRAMS
Source: Company, HDFC sec Inst Research

Page | 2

NAVIN FLUORINE: RESULTS REVIEW 2QFY16

Assumptions

Growth in CRAMS will remain

strong

Revenue Growth (%)

Refrigerants (ex CER)
Specialty Chemicals
Bulk Fluorides
CRAMS
MOL
CCPL
Revenues from Dewas new facility (Rs mn)
Gross Margins (%)
Refrigerants (%)
Specialty Chemicals (%)
Bulk fluorides (%)
CRAMS (%)
Standalone Gross Margin (%)
MOL EBITDA Margin (%)
CCPL EBITDA Margin (%)

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

21.6
35.3
27.2
-

(9.7)
11.9
1.0
-

(12.0)
(12.4)
14.0
85.7
60.2

25.3
37.8
(7.0)
19.2
16.1

15.0
12.0
(12.0)
126.8
15.0

10.0
101.0
15.0

300

990

10.0
92.8
15.0
25.0
2,280

50.0
56.0
35.0
65.0
51.8
18.0
-

50.0
56.0
35.0
65.0
53.2
18.0
17.0

50.0
56.0
35.0
65.0
55.1
18.0
17.0

64.9
-

51.6
10.8
-

52.7
13.4
-

50.2
19.3
-

Source : Company, HDFC sec Inst Research

Change in estimates led by

factoring in higher gross
margins and benefits from
operating leverage

Change In Estimates
(Rs mn)
Revenue
EBITDA
PAT
EPS (Rs/sh)

FY17E Old
8,909
1,334
921
94.3

FY17E New
8,478
1,340
945
96.8

YoY Gr (%)
(4.8)
0.4
2.6
2.6

FY18E Old
10,507
1,660
1,139
116.6

FY18E New
10,305
1,787
1,252
128.2

P/BV (x)
FY16E FY17E
0.9
0.9
2.1
1.8
7.8
6.1
4.4
3.9
3.0
2.5
2.4
2.2
3.0
2.6

FY15
13.7
17.9
29.3
20.5
20.6
9.5
13.9

YoY Gr (%)
(1.9)
7.7
10.0
10.0

Peer Valuations

Chambal Fert
Coromandel Int
PI Industries
Rallis India
UPL Ltd
Navin Fluorine
SRF Ltd

CMP
(Rs/sh)
58
187
647
206
476
1,579
1,359

Mcap
(Rs bn)
24.1
53.1
88.4
40.1
203.9
15.4
78.0

Rating
BUY
BUY
BUY
BUY
BUY
BUY
BUY

TP
(Rs/sh)
74
250
750
240
560
1,800
1,425

EPS (Rs/sh)
FY15 FY16E FY17E
7.1
8.7
9.2
14.2
17.4
22.9
17.1
21.5
26.6
8.1
7.6
10.0
26.7
30.1
35.4
55.9
75.0
96.8
52.7
75.9
89.1

FY15
8.1
13.2
37.9
25.5
17.8
28.3
25.8

P/E (x)
FY16E
6.6
10.7
30.1
27.2
15.8
21.0
17.9

FY17E
6.3
8.2
24.3
20.6
13.5
16.3
15.3

FY15
1.1
2.5
9.9
4.9
3.5
2.6
3.4

ROE (%)
FY16E
15.1
20.8
28.9
17.1
20.3
12.0
17.7

FY17E
14.3
23.6
28.2
20.1
20.3
14.1
18.1

Source : Company, HDFC sec Inst Research

Page | 3

NAVIN FLUORINE: RESULTS REVIEW 2QFY16

Income Statement (Consolidated)

(Rs mn)
Revenues
Growth (%)
Material Expenses
Employee Expenses
Other Operating Expenses
EBIDTA
EBIDTA Margin (%)
Growth (%)
Other Income
Depreciation
EBIT
Interest
PBT
Tax
PAT
Exceptional items
Minority Interest
APAT
Growth (%)
AEPS

FY14
4,862
(11.6)
2,283
591
1,329
660
13.6
(20.2)
308
218
750
55
827
148
680
133
(23)
568
30.9
58.2

Source: Company, HDFC sec Inst Research

Balance Sheet (Consolidated)

FY15 FY16E
5,915 6,826
21.7
15.4
2,890 3,274
741
882
1,562 1,703
722
967
12.2
14.2
9.4
34.0
295
310
201
217
816 1,060
33
36
783 1,024
200
292
582
733
(37)
546
733
(3.9)
34.3
55.9
75.0

FY17E
8,478
24.2
3,993
1,113
2,032
1,340
15.8
38.5
325
268
1,397
77
1,320
375
945
945
29.0
96.8

FY18E
10,305
21.5
4,694
1,382
2,442
1,787
17.3
33.4
342
289
1,840
85
1,755
503
1,252
1,252
32.5
128.2

(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholders Funds
Long Term Debt
Short Term Debt
Total Debt
Deferred Taxes
Other LT Liabilities
LT Provisions
Minority Interest
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Good will
LT Investments
LT Loans & Advances
Inventories
Debtors
Cash & Equivalents
ST Loans & Advances
Other Current Assets
Total Current Assets
Creditors
Other Current Liabilities
Provisions
Total Current Liabilities
Net Current Assets
TOTAL APPLICATION OF FUNDS

FY14

FY15

FY16E

FY17E

FY18E

98
5,456
5,553
2
574
576
334
38
243
92
6,838

98
5,779
5,877
275
338
613
323
53
223
129
7,217

98
6,283
6,381
275
638
913
323
53
223
129
8,021

98
6,931
7,029
275
738
1,013
323
53
223
129
8,769

98
7,795
7,893
275
238
513
323
53
223
129
9,133

2,475
57
410
1,018
318
656
905
1,663
260
33
3,516
609
216
131
956
2,560
6,838

2,329
604
410
1,160
906
761
1,199
834
278
40
3,111
892
249
161
1,303
1,808
7,217

3,401
100
410
1,160
906
1,239
1,239
768
309
46
3,600
1,147
249
161
1,557
2,044
8,021

3,260
600
410
1,160
906
1,519
1,519
869
292
57
4,257
1,414
249
161
1,824
2,433
8,769

3,649
100
410
1,160
906
1,844
1,844
928
355
69
5,041
1,723
249
161
2,133
2,907
9,133

Source: Company, HDFC sec Inst Research

Page | 4

NAVIN FLUORINE: RESULTS REVIEW 2QFY16

Cash Flow (Consolidated)

(Rs mn)
Reported PAT
Non-operating & EO items
PAT from Operations
Depreciation
Interest expenses
Working Capital Change
OPERATING CASH FLOW ( a )
Capex
Free cash flow (FCF)
Investments
Other Income
INVESTING CASH FLOW ( b )
Debt Issuance
Interest expenses
FCFE
Share capital Issuance
Dividend
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
Closing Cash & Equivalents

Key Ratios
FY14
588
206
381
218
55
(30)
625
(186)
438
174
206
194
(261)
(55)
122
(183)
(499)
319
379

Source: Company, HDFC sec Inst Research

FY15
587
198
389
201
33
(687)
(64)
(623)
(686)
(142)
198
(567)
36
(33)
(683)
0
(188)
(185)
(815)
281

FY16E
733
208
525
217
36
(301)
477
(786)
(309)
208
(578)
300
(36)
(44)
(229)
36
(65)
215

FY17E
945
218
727
268
77
(288)
785
(627)
157
218
(409)
100
(77)
180
(297)
(274)
101
316

FY18E
1,252
229
1,024
289
85
(416)
981
(178)
803
229
51
(500)
(85)
218
(389)
(973)
59
375

PROFITABILITY %
Gross margin
EBITDA margin
EBIT margin
APAT margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax rate %
Total Asset turnover (x)
Inventory (days)
Debtor (days)
Payables (days)
Cash conversion cycle (days)
Net Debt/EBITDA (x)
Net D/E
Interest coverage
PER SHARE DATA
EPS (Rs)
CEPS (Rs)
DPS (Rs)
BV (Rs)
VALUATION
P/E (x)
P/Cash EPS (x)
P/BV (x)
EV/EBITDA (x)
EV/Revenue (x)
OCF/EV (%)
FCFF/EV (%)
FCFE/M CAP (%)
Dividend Yield (%)

FY14

FY15

FY16E

FY17E

FY18E

53.0
13.6
15.4
11.7
10.7
8.8
9.2

51.1
12.2
13.8
9.2
9.5
7.5
8.1

52.0
14.2
15.5
10.7
12.0
9.5
10.0

52.9
15.8
16.5
11.1
14.1
12.0
11.9

54.5
17.3
17.9
12.2
16.8
15.5
14.7

21.2
0.7
49.2
67.9
45.7
71.4
0.9
(0.2)
13.6

25.6
0.8
46.9
74.0
55.1
65.8
0.8
(0.0)
24.5

28.5
0.9
66.2
66.2
61.3
71.2
0.9
0.0
29.8

28.4
1.0
65.4
65.4
60.9
70.0
0.8
0.0
18.1

28.7
1.2
65.3
65.3
61.0
69.6
0.3
(0.1)
21.7

58.2
80.6
16.0
569.2

55.9
76.5
16.0
601.6

75.0
97.3
20.0
653.2

96.8
124.3
26.0
719.6

128.2
157.8
34.0
808.0

27.1
19.6
2.8
21.7
2.9
4.4
3.1
2.5
1.0

28.3
20.6
2.6
21.1
2.6
(0.4)
(4.5)
(4.7)
1.0

21.0
16.2
2.4
16.1
2.3
3.1
(2.0)
(2.2)
1.3

16.3
12.7
2.2
11.6
1.8
5.0
1.0
0.5
1.6

12.3
10.0
2.0
8.4
1.5
6.5
5.4
4.7
2.2

Source: Company, HDFC sec Inst Research

Page | 5

NAVIN FLUORINE: RESULTS REVIEW 2QFY16

RECOMMENDATION HISTORY
Navin Fluorine

Date
15-Sep-15
29-Oct-15

TP

1,550

CMP
1153
1579

Reco
BUY
BUY

Target
1,415
1,800

1,050
550

Rating Definitions
Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

50

BUY

: Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL

: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 6

NAVIN FLUORINE: RESULTS REVIEW 2QFY16

Disclosure:
We, Satish Mishra, PGDM, & Deepak Kolhe, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
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Page | 7