Neutral Navin Fluorine Ltd For Target Rs. 4,815 - Motilal Oswal Financial Services Ltd
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* Navin Fluorine (NFIL) reported 44%/56% lower-than-estimated EBITDA/PAT due to subdued performances in the HPP/CDMO businesses. Gross margin stood at 58.7%, while EBITDA margin dipped 570bp QoQ to 23.3%. The company expects margin to rebound in the coming quarters with higher utilization at its various plants.
* High Performance Products (HPP) business (down 42% QoQ) disappointed in 1QFY24 due to multiple shutdowns at the new HFO plant as well as a planned shutdown at the AHF plant. Demand for R22 also remained muted both in the domestic as well as in the international markets. The Specialty Chemicals business jumped 11% QoQ with order book remaining strong. This continues to strengthen the long-term growth visibility of the segment.
* Management highlighted that the miss on volumes in HFO in 1QFY24 would be recovered in the next couple of quarters with the full-year offtake by Honeywell remaining unchanged. HFO plant would run at optimal capacity now. Discussion on debottlenecking is also going on with Honeywell for which a small capex would be undertaken (capacity to be expanded by 25%) and would be completed by CY24E.
* The company has also identified various late stage opportunities on which it is working right now. NFIL has also signed a contract with Fermion (nonexclusive) for three patented stage molecules, commercial supply of which would start in CY25. Management has given a revenue visibility of USD40m over a period of three years of the contract. These would be supplied from the CGMP-4 facility, engineering work of which is on the verge of completion.
* Given the underperformance in 1QFY24, we cut our revenue/EBITDA/EPS estimates by 7%/11%/11% for FY24 while keeping our FY25 estimates broadly unchanged. Subsequently, we expect a revenue/EBITDA/PAT CAGR of 35%/41%/37% over FY23-25. The stock is trading at 33x FY25E EPS of INR138 and 24x FY25E EV/EBITDA. We value the company at 35x FY25E EPS to arrive at our TP of INR4,815. We maintain our Neutral rating owing to limited upside.
Overall miss on estimates; sharp sequential contraction in EBITDAM
* NFIL reported revenue of INR4.9b (+24% YoY, -30% QoQ) in 1QFY24, below consensus by 16%.
* EBITDA margin came in at 23.3% (-170bp YoY, -570bp QoQ), with EBITDA at INR1.1b (est. of INR2.1b), below consensus by 30%.
* NFIL granted ESOPs to the senior leadership amounting to ~INR54m
* PAT stood at INR615m (est. of INR1.4b; -17% YoY, -55% QoQ), translating into an EPS of INR12.4 (v/s INR27.6 in 4QFY23), below consensus by 42%.
Overall miss on estimates; sharp sequential contraction in EBITDAM
* NFIL reported revenue of INR4.9b (+24% YoY, -30% QoQ) in 1QFY24, below consensus by 16%.
* EBITDA margin came in at 23.3% (-170bp YoY, -570bp QoQ), with EBITDA at INR1.1b (est. of INR2.1b), below consensus by 30%.
* NFIL granted ESOPs to the senior leadership amounting to ~INR54m
* PAT stood at INR615m (est. of INR1.4b; -17% YoY, -55% QoQ), translating into an EPS of INR12.4 (v/s INR27.6 in 4QFY23), below consensus by 42%.
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