Navin Fluorine International Research Report By HDFC Sec

Navin Fluorine (NFIL) reported stellar results with EBITDA growing at 129% YoY to Rs 317mn and PAT at Rs 232mn (+131% YoY). This was mainly because of higher realisation for R22 and better product mix in specialty chemicals.

Pickup in R22 prices is led by (1) The government banning the import of pre-filled cylinders, which pushed up demand from OEMs, and (2) 10% cut in domestic output of R22 in 2015 under the Montreal Protocol.

However, the big story for NFIL is yet to play out. The second round of capex for adding CRAMS capacity and a JV with Piramal Enterprises is near completion. We expect the share of specialty to rise to ~70% by FY18E vs. 50% in FY15. NFIL remains a net cash company even at the peak of its capex cycle and we expect FCF to turn positive from FY17E.

Robust growth, improving return ratios and a strong B/S will drive re-rating. Maintain BUY with a TP of Rs 1,800/sh (16x 12 months rolling forward EPS).

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