Gujarat Fluorochemicals Ltd. share price target

Gujarat Fluorochemicals (GFL) is at the cusp of inflection in earnings growth with revenue / EBITDA / PAT CAGR estimated at 20.4%/ 33.4%/ 46% over FY25-27E.

GFL highlighted its growth plans at the group level under InoxGFL group which include the chemicals and wind energy businesses. Management expects the group’s EBITDA to quadruple over coming 3 years led by ramp up in both, battery chemicals and renewable energy businesses.

GFL Q2FY25 earnings mirrored our projections. Revenue stood at INR 11,880 Mn, up 25.4% YoY (+1.0% QoQ), driven by robust growth in the Fluoropolymers and Fluorochemicals segment partially offset by the weaker Bulk Chemical segment.

Gujarat Fluorochemical Ltd Q1FY25 earnings missed our estimates despite revenue falling largely in line with our projections.
Revenue stood at INR 11,760 Mn, down 2.7% YoY (+3.8% QoQ), largely in line with our estimates (-1.8%).

GFL reported strong numbers which beat our estimates across the board.
Revenue increased by 14.2% QoQ to INR 11,330 Mn, primarily propelled by increased sales volume in the Fluoropolymer and Refrigerant business segments.

GFL’s Q4 EBITDA fell 54% YoY to Rs2.4bn (+15% QoQ) on sluggish
performance in the bulk and fluorochemicals businesses. Fluoropolymers
business is seeing sequential recovery in volumes on a lower base.

Gujarat Fluorochemicals exhibited signs of recovery, reporting a revenue of INR 9,917 Mn, reflecting a YoY decline of 30.1% and a QoQ growth of 4.7%. The fluorochemical segment contributed INR 2,460 Mn (-29% YoY/+33% QoQ), driven by increased volumes from the preceding quarter amid stagnant prices.

Gujarat Fluorochemicals' revenue plummeted to INR 9,468 Mn, a 35.2% YoY / 21.7% QoQ decline. Performance declined in all three business segments: Bulk Chemicals, Fluoropolymers, and Fluorochemicals. In the Bulk Chemicals segment, revenue were flat on a QoQ basis, but profits were negatively impacted by a drop in commodity prices.

Gujarat Fluorochemicals’ (GFL) Q2FY24 EBITDA at INR 1.6bn and EBITDA margin at 17.2% indicate dismal performance. Earnings were impacted by compression in gross margin, and lower absorption of fixed cost. However, we continue to like its business on two counts – 1) rising opportunity in fluoropolymers where change in industry structure can provide huge benefits for GFL; and 2) battery solutions where company is planning to cater demand of 30-40% cell producers with integrated electrolyte facility, cathode active material and PVDF blinder.

Gujarat Fluorochemicals’ (GFL) Q1FY24 EBITDA at INR 3.5bn was down 24% YoY. It was impacted by: 1) lower realisation for bulk chemicals where entire revenue loss flows down to PBT, and 2) lower fluoropolymers volumes which led to under-absorption of fixed costs.

Gujarat Fluorochemicals’ (GFL) Q4FY23 EBITDA at Rs5.3bn, up 60% YoY, was broadly in line with our estimates and was impacted by lower realisation across businesses – bulk chemicals, ref-gas and fluoropolymers. Revenue / EBITDA benefited from rise in volumes for R-125, and new fluoropolymers.

Consolidated revenue from operations for Q3FY23 was INR 14,179mn up 41% on a YoY basis. Volumes and prices remained stable during the quarter, barring marginal impact due to the holiday season in USA and Europe.

Gujarat Fluorochemicals’ (GFL) Q3FY23 EBITDA at Rs5.2bn, up 64% YoY, was broadly in line with our estimates. We particularly like the decline in bulk chemical contribution to 20.1% of total revenues, and we believe this would further decline in tandem with increasing revenues from fluoropolymers and battery chemicals, which have durable high-growth potential over the next few years.

Fluoropolymers business is likely to undergo a major shake-up from rising regulatory concerns due to use of PFAS class products. This could potentially lead to a huge opportunity for Gujarat Fluorochemicals (GFL) and address one of the key concerns on the company about durability of growth in fluoropolymers business.

Gujarat Fluorochemicals’ (GFL) stock price has corrected 21% in the past one-month,
and 25% in the past three months while fundamentals remain robust with opportunities expanding.

During the quarter GFL’s revenue came at INR 14,613 Mn (+51.59% YoY / +9.55% QoQ).

Gujarat Fluorochemicals’ (GFL) Q2FY23 EBITDA at Rs5.4bn, up 16.8% QoQ / 81% YoY, was 7% above our estimates.