IGI Logo

Non legacy business to lead show…

Navin Fluorine reported topline growth of 22% YoY to | 336 crore against our expectations of | 319 crore largely led by CRAMS and speciality chemical segments. Revenue from CRAMS was up 41% YoY to | 76 crore, while the same from speciality chemical was up 26% YoY to | 131 crore. The revenue from refrigerant & inorganic fluoride increased 4% YoY, 16% YoY to | 58 crore & | 59 crore, respectively. Gross margins for the quarter declined 230 bps YoY to 52.2%, leading to lower than anticipated EBITDA for the quarter.

EBITDA grew 23% YoY to | 84.2 crore vs. our expectations of | 88.2 crore. OPM for the quarter remained at 25% (up18 bps YoY). Adjusting the exceptional gain to the tune of | 15.5 crore on account of sale of CCPL shares along with other income of | 7.54 crore due to refund of income tax in Q4FY21, adjusted PAT was up 3% YoY to | 59.5 crore against our estimates of | 62.4 crore.

Upcoming capex in value added segment to aid overall performance

The company has been undertaking a capex of | 195 crore for the speciality chemical segment along with HPP plant with a capex of | 436 crore already in construction. The asset turn is expected to be around 1.3-1.5x. This would entail strong growth for high value segment. In turn, this translates into higher gross margins and thereby operational performance. We also expect that since the company is already working on more than 20 molecules for speciality chemical segment, this should support double digit revenue growth for the segment. Further, higher utilisation for CRAMS should support overall topline performance for the upcoming year

FCF generation likely to be robust, going ahead

With control on working capital along with focus on improving share of value added segments to overall revenue, we expect FCF to improve, to a certain extent, over the coming years. This should assist upcoming capex from internal accruals. Since this capex is for value added segments, we anticipate prudent capital allocation would aid return ratios further.

Valuation & Outlook

We believe post commissioning of speciality chemical and HPP plants, high value added segment revenue mix should inch up to more than 70%, leading to better gross margins and OPM for the group. In turn, this should aid return ratios, FCF and, thereby, assist the company to demand better valuations. We value the company at 45x PER of FY23E (~1.5x PEG). We arrive at a target price of | 3460 (vs. | 2820 earlier). We maintain HOLD recommendation on the stock.

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer