Buy Navin Fluorine International Ltd For Target Rs. 5,664 By Elara Capital
Strong growth prospects
Navin Fluorine International (NFIL IN) stock has runup 30% in the past six months and significantly outperformed the Nifty Mid-cap, which fell 4%, due to robust recovery in selected refrigerant prices – R32 up by ~20% and R22 by ~40% YoY in Q4FY25. We expect a 24% revenue CAGR and 45% EPS CAGR during FY25-28E, due to the recently commissioned a INR 5.4bn specialty plant, a INR 2.9bn cGMP4 plant by H2FY26, the recently completed 4,500- tonne R32 capacity expansion and new low contract with Chemours to establish initial capacity of Opteon, a low global warming potential (GWP) refrigerant. We increase our FY27E EPS by 9% due to benefits of growth from projects commissioning. We introduce FY28E EPS at INR 177.2, ascribing 36% YoY growth, assuming ramp-up of recently commissioned and under-construction projects. Therefore, we raise our DCF-based TP to INR 5,664 from INR 4,682 and revise to Buy.
PAT grew 35% YoY, driven by revenue growth and margin expansion: NFIL reported Q4FY25 PAT at INR 950mn, up 35% YoY and 14% QoQ, and higher than our estimates of INR 720mn. PAT growth was driven by: 1) 10% revenue growth of high performance products (HPP) segment due to higher refrigerant prices, 2) 140% revenue growth of contract development and manufacturing organization (CDMO) segment due to continued pipeline of orders, and 3) EBITDA margin expansion to 25% in Q4FY25 from 18% in Q4FY24, due to growth outperformance by the higher margin CDMO business.
Commissioning of projects across segments to support 24% revenue CAGR during FY25-28E: The agro-specialty project of INR 5.4bn was commissioned in Q3 where order was already in-hand for 50% of capacity. The anhydrous hydro fluoride (AHF) project worth INR 4.5bn to start in Q2FY26, delayed by a quarter, and commissioned 4,500-tonne capacity expansion of difluoromethane (or R32) in Q4FY25. In the CDMO segment, current good manufacturing practice (CGMP4) plant Phase 1 (INR 1.6bn) is likely to be commissioned by Q3FY26, with revenue potential 2x investment. The company has a target of ~INR 8.5bn CDMO revenue for the next 2-3 years from ~INR 3.4bn in FY25. It entered in a partnership with Chemours to establish USD 14mn initial capacity of the successful low GWP refrigerant called Opteon version used in data center cooling, with the potential to service higher demand.
Revise to Buy with a higher TP of INR 5,664: We reduce our FY26E EPS by 5% due to a quarter delay in AHF plant. However, based on robust revenue growth visibility due to expected ramp-up in newly commissioned and under-construction capacities, we raise our FY27E EPS by ~9%. We introduce FY28E EPS at INR 177.2, ascribing 36% YoY growth, assuming ramp-up of recently commissioned projects. So, we increase our TP to INR 5,664 from INR 4,682. We value NFIL on a DCF method, assuming 5.0% (unchanged) terminal growth and an 11.8% (unchanged) cost of capital, with an average EBITDA margin of 27.5% from 24.6% during FY26-28E and a 37% from 30% EBITDA CAGR during FY25-28E. We revise to Buy from Accumulate, due to revenue growth visibility with projects commissioning with contracts in-place for most upcoming capacity
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