Published on 18/05/2017 2:00:04 PM | Source: Emkay Global Financial Services Ltd

Accumulate Navin Fluorine International Ltd For Target Rs.3,240.00 - Emkay

Results mixed-bag; positive outlook; maintain ACCUMULATE

* NFIL’s Q4FY17 results were marginally below our estimates on revenue front mainly on account of decline in specialty segment revenue by 2.9% yoy and muted show from refrigerant (+0.3% Y/Y) and CRAMS (+4.8% Y/Y). Inorganic Fluoride segment have continued to perform well with 48.2% yoy growth in revenues.

* In Q4FY17, the company has reported sales / EBIDTA growth of +5.9% / +9.4% yoy to Rs2.0bn / 391mn. Change in product mix led to a 60bps yoy improvement in margins but not flown to PAT level due to higher depreciation & tax-rate.

* The near term outlook for specialty chemicals looks weak due to product specific issues and consolidation in global agrochemicals space. CRAMs is to remain strong and should support further expansion in margins.

* We factor strong growth in CRAMS and Inorganic fluoride space along with some recovery in refrigerant and specialty chemicals space. We maintain ACCUMULATE rating with TP Rs3,240 valuing the stock at 20x FY19E EPS of Rs160.


Muted business performance in key verticals, except inorganic fluoride segment NFIL reported revenue growth of 5.9% yoy to Rs2.01bn, marginally below our estimate of Rs2.03bn, due to only a 0.3% yoy growth in 83% of revenue portfolio (Refrigerant Specialty, & CRAMS). EBITDA/PAT at Rs391mn/Rs294mn are in-line with our estimate of Rs385 mn/Rs293 mn), respectively.

In FY17, two segments (Refrigerant & Specialty) contributed 63% (v/s 72% in FY16) of total revenue and de-grew by 2.6% Y/Y. During FY17, both CRAMs and Inorganic Fluoride segment witnessed growth in revenues at a healthy rate of 58.7% and 27.6% yoy, respectively. The Specialty chemicals segment reported de-growth of 5.2% yoy to Rs2.27bn, mainly on account of consolidation in global agrochemicals space and weak demand growth for certain molecules on pharmaceuticals side. EBITDA margin expanded 310bps yoy to 21.3% in FY17 On back of favorable product and geographic mix.


Outlook positive; Maintain TP with ACCUMULATE rating

Refrigerant business got impacted due to quotas in exports market and demand impairment in the non-emissive segment in domestic market. The growth in specialty chemicals segment remains challenging on account of slowdown in global agrochemicals space. Management has guided that both these issues shall subside going forward and prospects in this business remains healthy. NFIL is confident of maintaining strong growth in CRAMs and inorganic fluoride segments. We maintain our TP to Rs3,240 valuing the stock at 20x FY19E EPS of Rs160. We maintain our ACCUMULATE rating on the stock as performance is expected to remain healthy with strong cash flow generation and debt-free balance sheet. 


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