IGI Logo

Strong execution led by diversified growth engines

* Navin Fluorine International (NFIL) delivered a robust performance in 1QFY27, with revenue growing 44% YoY, driven by broad-based strength across all business segments. High Performance Products (HPP)/Specialty Chemicals/CDMO revenues grew 33%/48%/82% YoY. EBITDA surged 73% YoY, led by operating leverage and improved pricing in the HPP segment.

* We remain positive on NFIL's outlook, supported by its diversified portfolio. We expect the HPP segment to sustain its growth momentum, aided by a favorable pricing environment and ongoing capacity expansions, while the Specialty Chemicals business is likely to maintain its strong trajectory, supported by robust order visibility and continued scale-up of existing molecules. * Further we expect the CDMO business to sustain its momentum, supported by a balanced portfolio of late-stage, commercial, and early-stage molecules, along with the commercialization of Phase II cGMP-4 by 4QFY27.

* On the back of a strong 1QFY27 and improved EBITDA margin guidance, we increase our FY27/FY28 earnings estimates by 10%/13% and reiterate our Neutral rating on the stock with a TP of INR8,300 (40x FY28E EPS).

Robust 1QFY27 performance across all business segments

* NFIL reported revenue of INR10.5b (est. INR9.6), up 44% YoY, driven by growth across all three segments.

* Gross margin stood at 57% (down 60bp YoY), while EBITDA margin stood at 34.2% (28.5% in 1QFY26), driven by a favorable product mix and operational leverage.

* EBITDA stood at INR3.6b (est. INR3.2b), up 73% YoY, and adj. PAT grew 2.1x YoY to INR2.4b (est. INR1.9b)

* HPP revenue grew 33% YoY to INR5.4b, driven by higher volumes and improved realizations, while the pricing environment for HFC remained constructive.

* Specialty Chemicals revenue grew 48% YoY to INR3.3b, driven by 46% growth in the international business and strong scale-up across existing molecules.

* The CDMO business sustained its growth trajectory, with revenue growing 82% YoY to INR1.8b, driven by an increasing demand for existing molecules and continued deeper engagement with European CDMO majors.

* India/International revenue grew 50%/41% YoY in 1QFY27.

Valuation and view

* We believe NFIL is well-positioned to sustain its growth momentum, supported by the constructive pricing environment, growing international exposure, robust order visibility, and operational leverage, led by capacity ramp-up.

* The outlook is further supported by:

1) a strategic partnership with Chemours to foray into high-growth advanced materials (likely to be operational by 2QFY27)

2) planned investment for increasing the R32 capacity (likely to be operational by 3QFY27) and MPP debottlenecking for the specialty chemical plant at Dahej (targeted commissioning by 3QFY27)

3) the ramp-up of the AHF plant

4) the new advanced materials facility at Surat, to be commissioned by 2QFY28, targeting high-growth sectors and scaling customer-qualified products.

* We expect a CAGR of 26%/25%/26% in revenue/EBITDA/adj. PAT over FY26-28. The stock is trading at ~37x FY28E EPS of INR207 and ~24x FY28E EV/EBITDA. We value the company at 40x FY28E EPS to arrive at our TP of INR8,300, and we reiterate our Neutral rating.

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412