Navin Fluorine (NAVFLU)

CMP: | 4748 Target: | 5160 (9%) Target Period: 12 months HOLD

May 14, 2023

Numbers buoyed by strong CDMO beat…

About the stock: Navin Fluorine (NFIL) operates one of the largest integrated
fluorochemicals complexes in India with a presence in speciality chemicals, CDMO,

Result Update
and HPP (Refrigerants + Inorganic Fluoride + HPP). Particulars
Particular Amount
• The company has two manufacturing facilities in Surat and Dewas while it
Market cap (₹ Crore) 23,539
is setting up a new greenfield capacity at Dahej
FY23 Total Debt (₹ Crore) 861
• In terms of revenue contribution, speciality chemicals constitute 36% of FY23 Cash & Inv (₹ Crore) 35
overall revenues followed by CDMO 22% and the rest from HPP segment
EV (₹ Crore) 24,365
(refrigerants + Inorganic Fluoride + HPP) 42%
52 Week H/L 4900/3433
Equity Capital (₹ Crore) 9.9
Q4FY23 Results: Numbers were above I-direct expectations mainly due to the
strong CDMO performance even as other segments reported decent growth. Face Value (₹) 2

Shareholding pattern
• Reported revenue growth was 70.5% YoY to | 697.1 crore, led by CDMO up
131% YoY to | 203 crore, specialty chemical up 28% YoY to | 204 crore and in % Mar-22 Jun-22 Dec-22 Mar-23
HPP (refrigerants Gas + inorganic chemicals+ HPP) up 63% YoY to | 289 Promoter 30.2 29.7 29.4 28.8
crore FII 25.3 23.5 20.1 19.6

• Gross margins were up 741 bps YoY to 59.3% while EBITDA margin DII 16.0 18.3 22.7 24.8
increased 589 bps YoY to 28.9%. Absolute EBITDA was up 114% YoY to Others 28.6 28.5 27.9 26.8
| 201.8 crore
Price Chart

ICICI Securities – Retail Equity Research

80,000 6000
• Adjusted PAT increased to 81% YoY to | 136.4 crore. Finance cost was at
60,000
| 14 crore, up 52% QoQ 4000
40,000
2000
20,000
What should investors do? The stock appreciated at 47% CAGR in last three years. 0 0

Sep-20

Sep-21

Sep-22
May-20

Jan-21
May-21

Jan-22
May-22

Jan-23
May-23
• We maintain HOLD rating as the expected buoyancy in all three segments
has been priced in with very little margin of safety
BSE Sensex (LHS) Navin Flourine (RHS)

Target Price and Valuation: We value Navin Fluorine at 38x FY25E EPS of | 135.8
to arrive at a target price of | 5160/share (earlier | 4285/share). Recent event & key risks
• Capex of | 450 crore for setting
Key triggers for future price performance: up a new 40000 tonnes
hydrofluoric capacity at Dahej
• Ramping up of HPP, MPP and agrochemical intermediate to aid value added
business revenue mix and thereby group return ratios • Key Risk: (i) Cancellation of any
order or slowdown in order
• Expansion of hydrofluoric acid with foray into derivatives of HF, especially booking, (ii) Better than expected
margin expansion
in emerging area like EV battery chemicals, solar, 5G, etc
Research Analyst
• Commissioning of a new fluoro specialty molecule by end of CY23 with
Siddhant Khandekar
estimated revenue of | 600 crore annually siddhant.khandekar@icicisecurities.com
Karan Khona
Alternate Stock Idea: Besides Navin Fluorine, in our chemical coverage, we like karan.khona@icicisecurities.com
SRF.

• Trigger for SRF’s future revenue growth would be increasing specialty

chemical business
• BUY with a target price of | 3000
Key Financial Summary
5 year CAGR 2 year CAGR
(₹ Crore) FY19 FY20 FY21 FY22 FY23 FY24E FY25E
(FY18-23) (FY23-25E)

Net Revenue 995.9 1,061.6 1,179.4 1,453.4 2,077.4 17.9% 2,662.2 3,612.8 16.5%
EBITDA 218.4 263.5 309.3 354.8 550.3 20.7% 692.2 1,011.6 20.9%
EBITDA Margins (%) 21.9% 24.8% 26.2% 24.4% 26.5% 26.0% 28.0%
Adj.PAT 149.1 179.1 222.9 259.0 375.2 15.9% 451.6 672.9 22.1%
Adj. EPS (₹) 30.1 36.2 45.0 52.3 75.7 91.1 135.8
EV/EBITDA 106.5x 87.9x 74.0x 66.0x 44.2x 35.4x 23.2x
P/E 157.5x 131.2x 105.4x 90.8x 62.7x 52.1x 35.0x
ROE (%) 13.9 12.7 13.6 14.0 17.2 17.7 21.8
ROCE (%) 20.9 18.4 21.0 17.8 17.2 17.5 21.4
Source: Company, ICICI Direct Research
 Result Update | Navin Fluorine ICICI Direct Research

Key takeaways of recent quarter & conference call highlight

Q4FY23 Results: Strong growth across all segment led by capacity ramp up
and product mix
• High value business (Specialty chemical & CDMO): Revenues were up 65%
YoY to | 407 crore, led by strong growth in CRAMS segment with stability Navin - ESG Disclosure Score*
in the speciality chemical segment. The revenue from speciality chemical Score FY20 FY21 FY22
was up 28% YoY to | 204 crore while the same from CDMO increased by Environmental 12.7 12.7 12.7
131% YoY to | 203 crore
Social 20.6 20.6 20.6
• Legacy business (HPP): Revenue increased 91% YoY to | 289 crore, driven Governance 78.6 78.6 78.6
by commissioning of hydrofluoroolefins (HFO) and better realisations of
Overall ESG Score 37.34 37.34 37.34
refrigerant gas
Source: Blomberg, ICICI Direct Research, *Score ranges
from 0 - 100 with a higher score indicating higher ESG
disclosures

Q4FY23 Earnings Conference Call highlights

1. Specialty Chemicals –
➢ All business units delivered highest ever revenues and profitability
➢ Specialty chemical continues to delivers strong performance
driven by strong partnership and technology platforms
➢ Introduction of new products has made an impact on the
performance
➢ Agro-chemical intermediate plant achieved optimal utilisation in
last quarter
2. CDMO (CRAMS) –
➢ Highest quarterly revenue achieved in in Q4FY23
➢ Business is on strong footing and the management expects further
capacity expansion in the CDMO business
➢ Numbers for FY23 surpassed the management guidance of ~$10
million
➢ The company is witnessing new opportunities with key accounts.
Some accounts are outside fluorination area primarily driven by
good customer relationships
➢ On $16 mn contract for CDMO business, which was supposed to
deliver from April onwards, the management has supplied
significant portion in Q4, which is reflecting in revenues. The
remaining is expected to get delivered in FY24
3. HPP (Refrigerant Gas + Inorganic Fluorides + HPP) –
➢ The recent increased in sales can be attributed primarily to
increased volume from NFASL
➢ NFASL plant currently, is operating at optimum utilization
➢ R-32 plant with capex of | 80 crore will be commissioned as per
schedule and is expected to be commissioned in the beginning of
Q2FY24
➢ For R-32, the management is witnessing a lot of interest from some
existing customers as well as from new customers on long term
basis. The management expects R-32 pricing to remain strong for
the coming two to three years

Management comments-

Management focus areas or priorities

• To stabilise the plant and achieve optimum utilisation

• Debottlenecking of ~20% capacity in FY25

• Identified new molecules and developed, which currently are at early stage

Management on capex

• HF Plant – Capex has started well and is expected to be commissioned on

schedule (two years). With this capacity commissioning, the company will
be prepared to address rising demand in pharmaceuticals and agro-
chemical sectors as well as in emerging areas like EV battery chemicals,
solar, etc

ICICI Securities | Retail Research2

 Result Update | Navin Fluorine ICICI Direct Research

• Half of the HF capacity will be utilised immediately while remaining half will
be sold in the merchant market. Eventually, the later half will also be
consumed internally by the company

• Apart from the ongoing expansion, which is scheduled to be completed by

FY25 the company is in the process of finalising the business plant for two
projects to be presented to the board for approval in CY23. The two projects
are cGMP4 while another is related to the specialty chemical sector

• cGMP4 will be a significantly larger plant compared to the previous plant

Others

• The company has taken an annual plant shutdown for HFO in Dahej along
with HF plant in Surat for April. One line in HF was shut down for three
weeks while the HFO plant was shut for a month. From Q2FY24, we expect
the business to gradually normalise

• In other expenses for Q4FY23, the company has booked two one offs items,
which constitute ~| 15 crore of which | 5 crore is related to consultancy
charges. The management expect the charges not to be recurring from FY24
onwards

• Total Dividend for FY23 came in at | 12 per share

• Normalised depreciation and amortisation in FY24 to be ~| 80-90 crore at

current capitalisation

• Currently, the management is seeing no reason to believe there will be any

change in overall qualitative guidance given for each of the three
businesses. Issue with respect to inventory on agro-chemical side is not
seen by the company, to that extent. However, there is some impact with
respect to one product but the company has identified some other
opportunities, which will compensate the downslide

ICICI Securities | Retail Research3

 Result Update | Navin Fluorine ICICI Direct Research

Financial story in charts….

Exhibit 1: Better growth visibility from ongoing capex to aid topline (| crore)

3,613

2,662
2,077
1,453
996 1,062 1,179
742 913

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E

Source: Company, ICICI Direct Research

Exhibit 2: EBITDA (| crore) and OPM (%) trend

1,200 28.0% 30.0%
26.2% 26.5% 26.0%
24.8% 24.4%
23.6%
1,000 21.4% 21.9% 25.0%

800 20.0%

600 15.0%

400 10.0%

200 5.0%
159 215 218 263 309 355 550 692 1,012
0 0.0%
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E

EBITDA OPM%

Source: Company, ICICI Direct Research

Exhibit 3: PAT growth trend (| crore)

800 25.0%
700 19.7% 18.1%
18.4% 18.9% 18.6%
17.8% 20.0%
600 16.9% 17.0%
15.0%
500 15.0%
400
300 10.0%

200
5.0%
100
137 180 149 179 223 259 375 452 673
0 0.0%
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E

Adjusted PAT ANPM%

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research4

 Result Update | Navin Fluorine ICICI Direct Research

Exhibit 4: PE Band
Navin Fluorine Limited
90

80

70

60

50

40

30

20

10

0
Apr-12

Apr-17

Apr-22
Aug-15
May-14

May-19

Aug-20
Jul-13

Nov-16

Jul-18

Nov-21
Oct-14
Mar-15

Oct-19
Mar-20
Jun-16

Jun-21
Dec-13

Dec-18
Sep-12
Feb-13

Sep-17
Feb-18

Sep-22
Feb-23
Jan-16

Jan-21
-10

PE Mean +SD -SD

Source: ICICI Direct Research

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 Result Update | Navin Fluorine ICICI Direct Research

Financial summary

Exhibit 5: Profit and loss statement | crore Exhibit 6: Cash flow statement | crore
Year end March FY22 FY23 FY24E FY25E Year end March FY22 FY23 FY24E FY25E
Total Operating Income 1,453.4 2,077.4 2,662.2 3,612.8 PBT & Extraordinary 344.2 495.9 596.9 889.4
Growth (%) 23.2 42.9 28.2 35.7 Add: Depreciation 47.9 62.6 83.6 106.2
Raw Material Expenses 665.6 896.0 1,171.4 1,553.5 After other adjustments
Employee Cost 181.5 249.4 319.5 415.5 (Inc) / Dec in Working Capital -210.4 -530.7 -185.7 -451.0
Other Expenses 251.4 381.7 479.2 632.2 Taxes -78.1 -109.8 -145.3 -216.5
Total Operating Expenditure 1,098.6 1,527.1 1,970.0 2,601.2 Others -28.9 18.4 50.5 63.0
EBITDA 354.8 550.3 692.2 1,011.6 CF from operating activities 74.7 -63.6 400.1 391.2
Growth (%) 14.7 55.1 25.8 46.1 Purchase of Fixed Assets -578.9 -757.7 -425.0 -475.0
Other Income 39.2 35.7 38.9 47.1 Others 406.5 102.1 0.0 0.0
Depreciation 47.9 62.6 83.6 106.2 CF from investing activities -172.4 -655.6 -425.0 -475.0
Net Interest Exp. 1.9 27.5 50.5 63.0 Issue/(Buy back) of Equity 2.7 0.0 0.0 0.0
Other exceptional items 0.0 0.0 0.0 0.0 Inc/(dec) in loan funds 102.0 744.2 300.0 200.0
PBT 344.2 495.9 596.9 889.4 Dividned paid & dividend tax -54.2 -54.3 -90.3 -134.6
Total Tax 81.2 120.7 145.3 216.5 Others -9.0 -32.0 -50.5 -63.0
PAT 263.1 375.2 451.6 672.9 CF from financing activities 41.5 657.9 159.1 2.4
Adjusted PAT 259.0 375.2 451.6 672.9 Net cash flow -56.1 -61.3 134.3 -81.5
Growth (%) 16.2 44.9 20.4 49.0 Opening cash 543.9 95.8 34.8 169.1
Adjusted EPS (₹) 52.3 75.7 91.1 135.8 Closing cash 95.8 34.8 169.1 87.6
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 7: Balance sheet | crore Exhibit 8: Key ratios

Year end March FY22 FY23 FY24E FY25E Year end March FY22 FY23 FY24E FY25E
Liabilities Per share data (₹)
Equity Capital 9.9 9.9 9.9 9.9 Adj. EPS 52.3 75.7 91.1 135.8
Reserves & Surplus 1,834.3 2,175.0 2,536.3 3,074.7 Adj. Cash EPS 61.9 88.4 108.0 157.2
Total Shareholders Funds 1,844.2 2,185.0 2,546.3 3,084.6 BV 372.2 441.0 513.9 622.5
Minority Interest 0.0 0.0 0.0 0.0 DPS 11.0 12.0 18.2 27.2
Long Term Borrowings 100.0 759.6 959.6 1,059.6 Operating Ratios (%)
Net Deferred Tax liability 20.1 34.8 34.8 34.8 Gross Margin (%) 54.2 56.9 56.0 57.0
Other long term liabilities 23.5 13.5 17.3 23.4 EBITDA Margin (%) 24.4 26.5 26.0 28.0
Long term provisions 13.7 15.1 19.3 26.2 PAT Margin (%) 17.8 18.1 17.0 18.6
Current Liabilities and Provisions Debtor Days 90 99 90 90
Short term borrowings 4.5 101.3 201.3 301.3 Inventory Days 65 82 72 72
Trade Payables 146.5 243.5 291.7 395.9 Creditor Days 37 43 40 40
Other Current Liabilities 227.5 168.8 216.3 293.5 Cash Conversion Cycle 118 138 122 122
Short Term Provisions 5.4 8.0 10.2 13.8 Return Ratios (%)
Total Current Liabilities 383.9 521.5 719.5 1,004.6 Return on Assets (%) 10.9 10.6 10.5 12.9
Total Liabilities 2,385.5 3,529.3 4,296.7 5,233.1 RoCE (%) 17.8 17.2 17.5 21.4
Assets RoE (%) 14.0 17.2 17.7 21.8
Net Block 415.9 1,506.5 2,076.4 2,445.2 Solvency
Capital Work in Progress 742.1 278.6 50.0 50.0 Total Debt / Equity 0.1 0.4 0.5 0.4
Intangible assets under devl. 0.0 0.0 0.0 0.0 Interest Coverage 182.2 19.0 12.8 15.1
Goodwill on Consolidation 87.8 87.8 87.8 87.8 Current Ratio 2.7 2.8 2.6 2.4
Non-current investments 13.9 12.7 12.7 12.7 Quick Ratio 2.0 1.9 1.9 1.6
Deferred tax assets 0.0 0.0 0.0 0.0 Valuation Ratios (x)
Long term loans and advances 6.0 0.3 0.4 0.6 EV/EBITDA 66.0 44.2 35.4 23.2
Other Non Current Assets 100.5 177.3 212.7 270.1 P/E 90.8 62.7 52.1 35.0
Current Assets, Loans & Advances P/B 12.8 10.8 9.2 7.6
Current Investments 104.2 31.1 31.1 31.1 EV/Sales 16.1 11.7 9.2 6.5
Inventories 257.5 468.1 525.1 712.7 Source: Company, ICICI Direct Research
Sundry Debtors 357.7 561.5 656.4 890.8
Cash and Bank 95.8 34.8 169.1 87.6
Loans and Advances 0.5 0.0 0.0 0.0
Other Current assets 203.5 370.6 474.9 644.5
Current Assets 1,019.3 1,466.2 1,856.7 2,366.7
Total Assets 2,385.5 3,529.3 4,296.7 5,233.1
Source: Company, ICICI Direct Research

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 Result Update | Navin Fluorine ICICI Direct Research

Exhibit 9: ICICI Direct coverage universe (Chemicals)

CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)
Company
(|) TP(|) Rating (| Cr) FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E
SRF 2570 3,000 Buy 76,218 63.5 72.7 79.4 34.4 30.0 27.5 21.3 19.3 17.8 23.8 21.9 20.6 22.1 20.9 19.4
PI Industries 3030 3,615 Buy 45,971 55.5 76.9 91.8 56.1 40.5 33.9 39.7 31.1 25.3 16.3 18.8 19.5 13.8 16.2 16.3
Aarti Industries 502 515 Hold 18,373 32.7 15.0 18.0 25.1 54.4 45.4 28.9 29.7 24.6 11.8 9.7 10.4 14.6 11.1 11.9
Tata Chemical 978 1,130 Buy 24,807 47.5 89.5 109.3 20.6 10.9 8.9 12.7 7.7 5.2 6.6 10.4 10.8 6.6 11.6 12.5
Vinati Organics 2027 2,055 Hold 20,829 33.7 41.6 48.0 56.0 45.4 39.4 44.7 35.6 30.3 24.3 23.9 22.4 19.0 19.7 19.2
Sumitomo Chemical 425 525 Buy 21,236 8.5 10.8 12.4 51.6 40.5 35.2 35.7 28.4 24.2 30.2 30.1 28.1 22.0 22.4 20.9
Navin Fluorine 4748 5,160 Hold 23,539 52.3 75.7 91.1 90.8 62.7 52.1 66.0 44.2 35.4 17.8 17.2 17.5 14.0 17.2 17.7
Rallis India 206 223 Hold 4,000 8.4 8.7 11.8 26.5 25.7 18.9 15.2 15.5 11.4 12.7 11.4 14.7 9.7 9.4 11.6
Sudarshan chemical 417 370 Hold 2,885 18.8 4.4 18.1 19.2 81.8 19.9 11.9 16.9 9.7 10.9 4.7 12.3 15.6 3.6 13.2
Neogen Chemicals 1605 1,535 Buy 4,003 17.9 28.2 35.2 72.4 45.9 36.8 38.1 26.9 21.5 12.0 15.4 14.8 10.2 14.0 15.0
Astec Lifesciences 1356 1,307 Reduce 2,659 45.1 27.5 39.9 30.8 50.4 34.8 19.4 26.8 19.7 19.3 10.1 12.6 22.3 12.0 14.8
Source: Bloomberg, ICICI Direct Research

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 Result Update | Navin Fluorine ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
Third Floor, Brillanto House,
Road No 13, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

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 Result Update | Navin Fluorine ICICI Direct Research

ANALYST CERTIFICATION
I/We, Siddhant Khandekar, Inter CA and Karan Khona, CA, Research Analysts, 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. It is also confirmed that above mentioned
Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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