Hold Gujarat Fluorochemicals Ltd for the Target Rs.3,434 by PL Capital
Quick Pointers:
* The company plans to set up a greenfield advanced battery materials project in Oman for Li-ion batteries, with an estimated investment of USD216mn.
* In Dec’25, IFC approved Rs4.3bn investment in GFL EV; another sovereign fund has approved USD82mn investment, for which documentation is underway.
FLUOROCH reported consolidated revenue from operations of Rs11.4bn, down 1% YoY and 6.1% QoQ. The Fluoropolymers segment grew 14% YoY, but declined 2.6% QoQ, impacted by the holiday season in Europe and the US, as well as demand deferment due to US tariffs on new fluoropolymers. However, PTFE was exempt from these tariffs, and post tariff reduction, this segment is expected to witness strong growth. The Fluorochemicals segment declined 33% YoY and 24% QoQ, mainly due to lower sales of R22, impacted by quota reductions and seasonality, and R125, which was affected by US tariffs. The R32 plant commenced operations this month, and capacity expected to be ramped up to 20,000mtpa by Q2FY27. The Bulk Chemicals segment reported a 6.3% sequential increase, but a 7% YoY decline, mainly due to lower prices of chloromethanes and caustic soda. The Battery Chemicals segment began contributing to topline, with FY27 and FY28 expected to be growth years.
With US tariff issues now resolved, the Fluoropolymers business is expected to lead overall growth. However, the Battery Chemicals business may take longer than anticipated to make a meaningful contribution to the topline; LiPF? is expected to be the only key contributor in FY27. The stock is currently trading at 40x FY28E EPS. We value the stock at 45x Dec’27E EPS, with TP of Rs3,434, and maintain ‘HOLD’ rating.
* Revenue declines, driven by 24.4% QoQ/33% YoY drop in Fluorochemicals: Consolidated revenue stood at Rs11.4bn, down 1% YoY/6.1% QoQ (PLe: Rs12bn, Consensus: Rs12.4bn); actual topline was 5.2% lower than our estimates. 9MFY26 revenue stood at Rs36.3bn, an increase of 3.3% YoY. GFL EV contributed Rs140mn to Q3FY26 revenue. Gross profit came in at Rs7.6bn, with a margin of 66.8% (vs. 72.2% in Q3FY25 and 71.2% in Q2FY26), contracting 440bps QoQ and 540bps YoY, due to higher raw material costs.
* EBITDAM contracts by 590bps QoQ: EBITDA stood at Rs2.8bn, -6.5% YoY/ -24.5% QoQ. EBITDA margin came in at 24.2% (PLe: 28.3%, Consensus: 28.7%) vs. 25.6% in Q3FY25 and 30.1% in Q2FY26. Margin contraction was led by lower realizations and volumes across a few product segments. Reported PAT stood at Rs1bn (-19% YoY/ -43% QoQ), while margins were at 9% in vs. 11% in Q3FY25 and 14.8% in Q2FY26.
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