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Strong performance across segments fuels growth momentum

Earnings beat estimates

* 2QFY26 was a strong quarter for Navin Fluorine International (NFIL), with revenue rising 46% YoY, supported by strong performance across all three business segments. Revenue in HPP/specialty chemicals/CDMO grew 38%/ 39%/97% YoY. EBITDA grew 2.3x YoY, driven by volume growth, operating efficiencies, pricing environment, and a favorable product mix

* We expect this momentum to sustain in 2HFY26, supported by the stable pricing environment of refrigerant gases, robust order book pipeline, and higher realizations and volumes in both domestic and international markets, leading to higher EBITDA margin.

* On the back of a robust 1HFY26, we increase our FY26/FY27/FY28 earnings estimates by 22%/15%/11% and reiterate our Neutral rating on the stock with a TP of INR5400 (40x Sep’27E EPS)

Operating leverage and better product mix drive earnings

* NFIL reported revenue of INR7.6b (est. in line), up 46% YoY, driven by growth across all three segments.

* Gross margin stood at 58.7% (up 200bp), while EBITDA margin stood at 32.5% compared to 20.7% in 2QFY25, driven by operational efficiencies, stable pricing environment, and a favorable product mix

* EBITDA stood at INR2.5b (est. INR1.7b), up 2.3x YoY, and PAT grew 2.5x YoY to INR1.5b in 1QFY26 (est INR892m).

* Revenue in the HPP segment grew 38% to INR4b, driven by higher volumes and improved realizations in both domestic and international markets, supported by the R32 plants running at optimal capacity.

* Revenue in the Specialty Chemicals segment grew 39% YoY to INR2.2b, driven by 81% growth in the international business. The CDMO business continued its growth trajectory in 2QFY26, with revenue growing 97% YoY to INR1.3b.

* India’s revenue grew 2% YoY, while revenue from the International business grew 82% YoY.

* In 1HFY26 Revenue/EBITDA/Adj. PAT grew 42%/2.2x/2.4x to INR14.8b/INR4.5b/INR2.7b

Highlights from the management commentary

* CDMO: Following the successful delivery of late-stage pipeline molecules, management highlighted that the plant was audited by three leading global innovators. Further, the order book pipeline till FY27 remains strong, backed by robust purchase orders.

* HPP: The Board has approved capital expenditure of INR2.4b, adding 15,000 MTPA of R32 HFC capacity. This expansion is driven by strong global demand stemming from the transition to low-GWP gases and rising RAC and blend demand in both domestic and export markets. The project is expected to be completed by 3QFY27, with a peak revenue potential of INR6-8.25b.

* Margin guidance: Management remains optimistic about 2HFY26 and beyond, supported by a strong order book, deep customer relationships, and continued focus on R&D. Reflecting this confidence, the company has raised its EBITDA margin guidance to 28-30% (from 25% earlier) for FY26.

Valuation and view

* On the back of a robust 1HFY26, we believe the company is well-positioned to sustain its growth momentum in 2HFY26, led by robust order books, strategic customer relationships, ongoing R&D investment, new product launches, and repeat orders expected in CY26.

* The medium-term outlook is further supported by: 1) a strategic partnership with Chemours to foray into high-growth advanced materials, 2) planned investment toward increasing the R32 capacity and MPP debottlenecking for the specialty chemical plant at Dahej, and 3) strategic relations with global players.

* We expect a revenue/EBITDA/adj. PAT CAGR of 24%/34%/38% over FY25-28. The stock is trading at ~38x FY27E EPS of INR129.8 and ~24x FY27E EV/EBITDA. We value the company at 40 Sep’27E EPS to arrive at our TP of INR5,400, and we reiterate our Neutral rating.

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