LIC Increases Stake In Navin Fluorine International To 5.04%; Here's What Analysts Say

Life Insurance Corporation of India (LIC) has augmented its stake in Navin Fluorine International, a prominent Indian manufacturer specializing in fluorochemicals, by 0.24% through open market transactions. The insurance giant revealed this development in a regulatory filing on Tuesday, disclosing the acquisition of 1.21 lakh shares of Navin Fluorine International on January 8 at an average price of Rs 3,630.39 per share. This purchase has propelled LIC's overall stake in the company to 5.04%, marking an increase.

Navin Fluorine International, a key player in the field of fluorine chemistry, is engaged in the production of refrigeration gases, chemicals, inorganic bulk fluorides, and specialty organofluorines. Additionally, the company provides contract research and manufacturing services. Despite facing challenges, including weak demand and heightened Chinese exports, the company has sustained a 415% gain over the last five years and 6,265% over the last decade.

The company's shares have experienced a downtrend since May 2022, primarily attributed to weakened demand and increased Chinese exports. Over the past nine months, the stock has depreciated from Rs 4,668 per share to the current value of Rs 3,504, reflecting a 25% decline. However, industry analysts and global brokerage firm Jefferies remain cautiously optimistic about Navin Fluorine International's future prospects.

Jefferies, in a recent note, expressed its expectations of a slowdown in company capital expenditure until the new Managing Director establishes priorities following a leadership turnover. The departure of the Head of Sustainability further contributes to the challenges faced by the company. Despite these hurdles, Jefferies anticipates a gradual scale-up of Navin's new agrochemical facility, with ongoing delays expected in delivery schedules until demand normalizes by the end of FY25.

While acknowledging persistent demand challenges in the first half of CY24, Jefferies projects a more favourable outlook for Navin Fluorine International's Contract Development and Manufacturing Organization (CDMO) segment. The recent product deferrals to CY2024 are expected to expedite growth in FY25, and a substantial $40 million, 3-year contract win from Fermion is anticipated to be a significant driver of growth in FY26.

"The segment is lumpy, and the company's strategy to target late-stage Phase 2 and Phase 3 molecules should help steer a faster ramp-up in the business, in our view. The management maintains guidance of reaching the US$ 100 million revenue target by FY26-27E, though this could be more gradual than earlier anticipated," stated the brokerage.

However, Jefferies has adjusted the FY24/25E earnings per share (EPS) downward by 9%/7%, attributing it to a slower-than-anticipated recovery in chemicals demand and a year-on-year decline in CDMO in FY24E. Despite the challenges, the brokerage maintains a 'hold' rating on the stock, emphasizing that the company's valuations remain premium to competitors PI Industries and SRF. Jefferies has set a target price of Rs 3,425 apiece for Navin Fluorine International's shares.