Navin Fluorine International Ltd. share price target

Margin softens; outlook elevated by new multi-year contract

High value businesses to accelerate growth

In terms of revenue contribution, speciality chemical constitutes 40% of overall revenue followed by CRAMS of 25% and the rest from refrigerant (~18%) and inorganic fluoride (~17%) businesses Q3FY22 Results: Numbers were above our estimates across all parameters, led by strong growth from speciality chemical, inorganic fluoride and refrigerants. Gross margins were up 170 bps YoY to 55.6% while EBITDA margin was up 40 bps YoY to 26%, due to higher operating cost such as employee (up 30%...

NFIL reported a revenue/EBITDA that was 9%/8% higher than our estimate. Gross margin was in line at 56%, while EBITDA margin grew 90bp QoQ to 26.7%. Growth in 3QFY22 was driven by strong growth in the legacy business Refrigerant Gas and the Inorganic Fluorides (up 31%/28% QoQ) and was led by increased realization and improved pricing on the back of strong demand in the domestic market. The management is confident of maintaining its quarterly run-rate of USD10m in the CRAMS segment in 4QFY22. Specialty Chemicals growth was led by partnerships with large international customers....

Fluorine is the second smallest element after hydrogen. Selecting small organic molecules to act as a ligand to target biomolecules (enzymes, proteins, DNA) on the surface or inside cells is crucial for bioactive reagents. These ligands generally interact with biomolecules to form complexes, controlling the biological processes in insects, plants, and bacteria. Addition of fluorine atoms to active compounds can improve their binding by altering hydrogen-bonding and ionic interactions, and lipophilicity. A highly lipophilic compound is crucial, particularly in the case of insecticides, for the...

Pharmaceutical drugs can be oxidized by liver enzymes or other substances, thereby decreasing the bioavailability of the drugs. However, the introduction of a fluorine atom makes the drug resistant to metabolic degradation. This increases the bioavailability of the drug at the site of required action. A classic...

We retain a BUY on the stock with a TP of Rs 3,930/share, valuing it at 39x its FY24E EPS.

Deal win fuels NFIL's growth trajectory

Navin Fluorine International’s (NFIL) Q2FY22 EBITDA dip of 10.6% YoY shows it was walking a tight rope on revenue growth with limited capacity in specialty chemicals, and volatile CRAMS revenue. NFIL is also catching up with peers and is accelerating investment in capabilities by adding a technology team and expanding R&D. Company is in a sweet spot to monetise fluorination opportunities, but the evolution would be gradual compared to impatient market expectations.