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Maintains Growth Momentum; Clear Revenue Visibility Going Ahead

Est. Vs. Actual for Q1FY26: Revenue: INLINE; EBITDA: BEAT; PAT: BEAT

Change in Estimates post Q1FY26

26E/FY27E: Revenue: 5%/4%; EBITDA: 11%/9%; PAT: 11%/14%

Recommendation Rationale

• Navin Fluorine International Ltd. (NFIL) delivered a strong all-round performance in Q1FY26, with robust growth across all three business verticals and a notable improvement in margins. Management remains confident in sustaining this momentum through the rest of the fiscal year.

• HPP – Strong Growth on Volume & Pricing: The HPP segment recorded a 45% YoY revenue increase, driven by higher volumes and better pricing. The successful commercialisation of additional R32 capacity in March 2025, now being fully utilised, positions NFIL well to capitalise on increasing global demand. Management has noted a stable pricing environment for refrigerant gases and is exploring strategic international partnerships to further tap into this opportunity.

• Specialty Chemicals: Solid Order Visibility: Revenue from the Specialty Chemicals division grew 35% YoY, with operations running at optimal utilisation across the Dahej and Surat plants. A healthy order pipeline extends into FY26, and the company is set to begin supplies for three new molecules in Q2FY26. Additionally, the fluoro-specialty hydrogen project launched in Dec’24 is expected to contribute meaningfully this year.

• CDMO: Healthy Traction Continues: The CDMO business reported 23% YoY revenue growth, supported by a robust order book. The ongoing Rs 288 Cr cGMP4 capex is progressing well, with Phase 1 expected to be operational by Q3FY26. The European CDMO business also continues to gain traction, aided by regulatory approvals for a new molecule across the US and EU markets.

Sector Outlook: Cautiously Optimistic

Company Outlook & Guidance: The company remains committed to expanding its capacity while simultaneously striving to optimise utilisation levels, boost productivity, and improve operational efficiency across all segments. A healthy order book provides strong revenue visibility in the near to medium term. Backed by ongoing capacity additions, upcoming molecule launches, and expected collaborations in the CDMO segment, the company is well-positioned for robust growth in FY26 and FY27. While management continues to be conservative in terms of margins gudiance, a consecutive quarter of margin expansion signals possibility of an upward revision.

Current Valuation: 33x FY27E (Earlier Valuation: 30x FY27E).

Current TP: Rs. 5,400/share (Earlier TP: 4,440/share).

Recommendation: We maintain our HOLD rating on the stock.

Financial Performance: Navin Fluorine International Ltd. (NFIL) delivered a robust performance in Q1FY26. Revenue came in at Rs 725 Cr, registering a 39% increase YoY and 3% QoQ, in line with our estimate. However, the performance exceeded our estimates on the profitability front. EBITDA rose sharply to Rs 207 Cr, marking a robust 106% YoY and 16% QoQ growth, surpassing the estimate of Rs 184 Cr. EBITDA margins expanded significantly to 28.5% vs 19.2% in Q1FY25 and 25.5% in Q4FY25, led by operating leverage and improved product mix. PAT stood at Rs 117 Cr, up 129% YoY and 23% QoQ, beating our estimate of Rs 99 Cr.

Outlook: NFIL’s expansion plans across all three business segments underscore its focus on increasing value addition, tapping into high-margin opportunities, and diversifying into fast-growing sectors. Its consistent track record of forging global partnerships and strategically expanding its product portfolio supports a positive long-term growth outlook. We continue to anticipate accelerated growth from FY26 onwards as key growth drivers gain traction.

Valuation & Recommendation

We have revised our estimates upwards and re-rated the stock at 33x FY27E, reflecting the company’s emphasis on business expansion, technological advancements, strategic alliances, and sustained demand for its key products. However, the stock has seen a strong run-up in the recent period, and valuations seem to have partially caught up. Accordingly, we maintain our HOLD rating, while raising the target price to Rs 5,400/share (earlier Rs 4,440), indicating a modest upside potential of around 4% from CMP.

Key Concall Highlights

• Financial Overview: NFIL delivered a strong quarterly performance. The HPP segment recorded a solid 45% YoY growth, driven by volume gains and better price realisations. The Specialty Chemicals division posted a 35% YoY increase, while the CDMO segment grew by 23% YoY, contributing meaningfully to overall performance. Gross margins improved to 57.6% from 56% in Q1FY25. EBITDA margin expanded by 934 bps YoY to 28.5%, with approximately two-thirds of the improvement attributed to operating leverage and the remainder to pricing and market conditions. The company maintained a stable financial position with a debt-to-equity ratio of 0.34x.

• QIP Fundraise: NFIL successfully completed a Qualified Institutional Placement (QIP), raising Rs 750 Cr through the issuance of 16,02,564 equity shares at Rs 4,680 per share (including a premium of Rs 4,678 per share). The funds will support growth initiatives and enhance the company’s capital base.

• HPP: The commercialisation of expanded R32 capacity was completed in March 2025, now operating at full utilisation. Strong demand and stable pricing continue in both HFOs and R32 categories. The Rs 450 Cr AHF capex project is on track for commissioning by Q2FY26, aimed at strengthening NFIL’s footprint in the solar and electronics sectors both domestically and globally. The exclusive collaboration with Buss ChemTech AG for high-purity electronic grade HF is progressing steadily.

• Specialty Chemicals: NFIL is operating at peak utilisation across its Dahej and Surat facilities and has secured strong order visibility for FY26. The company has received validation from global partners for two new fluoro intermediates linked to AI applications, with initial supplies scheduled to begin in Q2FY26. Another fluoro molecule is also expected to be supplied in the upcoming quarter. Additionally, NFIL announced a strategic partnership with Chemours to manufacture its proprietary product Opteon, a two-phase immersion cooling fluid, with project execution already underway.

• CDMO: The CDMO segment achieved 23% YoY revenue growth, supported by a robust order pipeline and healthy visibility. The Rs 288 Cr cGMP4 capex project is on schedule, with Phase 1 involving an investment of Rs 160 Cr expected to be operational by Q3FY26.

• Margin Guidance: The management expressed confidence in exceeding its margin guidance of 25%, given that it has been higher in the recent two quarters (28.5% in the current quarter). However, the management refrained from revising the guidance upwards, preferring to wait until the trend persists for a couple more quarters.

• Capex Plans: For FY26, NFIL has earmarked a capex of Rs 500–600 Cr. However, with the recent fundraise, management indicated the investment could be scaled up to Rs 700–1,000 Cr depending on the progress of maturing projects. Additional capital deployment decisions will be taken as these projects advance.

Key Risks to Our Estimates and TP

• A global recessionary environment, especially a prolonged recession, could affect demand for upstream players.

• Significant price fluctuations in key raw materials and key products. • Delay/Early ramp-up in Capex and Commercialisation of plants

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