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Analyst Meet update: Aggressive guidance; we await visible rampup in EV entity

GFL conducted an analyst meet, which was represented by Chairman Vivek Jain, Executive Director Devansh Jain, and Dy MD and CEO Dr Bir Kapoor. GFL highlighted its growth plans at the group level under InoxGFL group which include the chemicals and wind energy businesses. Management expects the group’s EBITDA to quadruple over coming 3 years led by ramp up in both, battery chemicals and renewable energy businesses. GFL’s fluoropolymers business is currently subdued due to macro challenges, with the mgmt working toward developing and establishing higher grades. In the battery chemicals vertical, GFL targets offering a broader portfolio of salts, additives, electrolytes, and binders. We await further updates on funding rounds in the GFCL EV entity. We keep our estimates unchanged, and maintain SELL with TP of Rs3,800.

Battery Chemicals – Valuation already in the price

Battery Chemicals vertical is likely to overtake Fluoropolymers in terms of revenue share, over the next few years (~55% by FY30E). The company focuses on being a partner with battery manufacturers outside the Chinese supply chain and to gain an early mover advantage for receiving long-term qualification for its products. GFF’s EV business is bifurcated into 3 verticals, viz electrolytes (salts LiPF6, NaPF6; formulations, additives), binders (PVDF, PTFE), and cathode active material (LFP). This set of products shall cater to ~50% of the LFP cell cost. Except for CAM, all products are agnostic to LFP and NMC batteries. LFP batteries are relatively lower in cost vs NMC batteries. LFP remains the preferred choice in the energy storage segment. GFL’s LFP plant would be commissioned by the end of Dec-24 and be ready for commercial production by Mar-25. The company plans adding 30KT of salt capacity and 200KT of LFP capacity by FY30 which is largely factored into the 2x asset turn, on capex guidance of Rs60bn by the company. We build in Rs180bn of valuation, adjusting for the 96% stake and 25% holdco discount.

Fluoropolymers – GFL focusing on value-added grades

GFL re-affirmed its stance on significant the growth potential in Fluoropolymers, led by EVs, semi-conductor application, solar panel, hydrogen fuels, etc and by its focus on value-added grades where China neglects US/EU customers due to limited volume. GFL stressed on the FKM demand increasing, led by ethanol blending needs of 20% from CY25 onward, as NBR is unlikely to be able to meet related requirements. The management is confident of utilizing existing/debottlenecked capacities and garnering ~20% share of 3M’s revenue (on its closure in CY25). Mgmt stated 3M’s customers have built 3-4 months of inventory, with market share gains to start by FY26.

Capex funding to be a mix of equity and internal accruals

Mgmt guided to Rs60bn FY24-26 capex. GFL has sufficient land at Jolva, Gujarat; has purchased new land in Dahej-C; plans overseas manufacture of LFP, as it has FTA with USA. It is looking at next fundraise round, with investment from PE and sovereign funds.

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