This Specialty Chemical Stock Is Axis Securities’ Pick of The Week; Here’s Why

Specializing in fluorine chemistry, Navin Fluorine International Ltd (NFIL) produces refrigeration gases, inorganic fluorides, and speciality organofluorines, among other products. Hydrofluoric acid, fluorocarbon gases, synthetic cryolite, and other fluorine compounds are all part of its product line. The company also offers manufacturing and contract research services. NFIL is an Indian company that produces anhydrous and diluted hydrofluoric acid. It serves a range of sectors, including electronics, glass, stainless steel, oil and gas, abrasives, and life and crop sciences. The brokerage firm Axis Securities has recommended to buy the stock as its top pick of the week for a target price of Rs 3,430 from the current market price of Rs 3,096, which implies a potential upside of 14%.

Investment Rationale

Below are the reasons to buy the shares of Navin Fluorine International according to Axis Securities.
Continued Strategic Investments in CDMO: NFIL intends to invest Rs 288 Cr in capital expenditures to establish a cGMP4 facility with a capacity of 200 KL in Dewas, split into two phases, to be funded by internal accruals. The first phase, with a capacity of 100 KL and an expenditure of Rs 160 Cr, is expected to be operational by the end of CY25. The commencement of phase 2 of the capital expenditure will depend on the progress of the MSA and business projections.

CDMO outlook remains strong: The company has broadened its Master Service Agreement (MSA) with European API customers to encompass two new molecules, bringing the total to three. These molecules serve as intermediates to a patented commercial product, showing promising prospects. Starting from FY26, the MSA is anticipated to make a substantial contribution to CDMO revenue. The proposed cGMP4 phase 1 capacity is essential to support the MSA and unlock the business vertical's $100 million topline aspiration.

Q4 to be better than Q3 due to Deferred Orders: Global Agro-Chem majors have postponed orders, aiming to reduce high-cost channel inventory, which has impacted the company's specialty chemical business but has led to an improvement in working capital. The ramp-up of the HFO Plant at Dahej is progressing slower than anticipated, with revenue expected in FY25E, and the company is collaborating with Honeywell to resolve the issue. Q4 is projected to outperform Q3, with sequential margin improvement anticipated.

Optimum Utilization of Ref Gas Capacity: The company indicated that the R22 and R32 capacity is currently operating at its maximum capacity. In FY25, it is expected that Honeywell's capacity could yield peak revenues of INR 4.6 Bn.

Navin Fluorine International Shares Outlook & Valuation

NFIL remains dedicated to long-term investments within a prudent financial framework. With CDMO expected to drive growth, NFIL's history of effective execution and business attraction is a key advantage. Moreover, NFIL's emphasis on specialty chemicals, along with strategic capital expenditure in its traditional sector, is poised to fuel future revenue expansion. As such, we assign a target price of Rs. 3,430 per share, based on a 32x Sep'26E EPS valuation, indicating an 11% upside from the CMP, said Axis Securities in a note.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.