Navin Fluorine International, one of the largest Indian manufacturers of speciality fluorochemicals, has witnessed a remarkable increase in its share price by almost 215% over the past three years, surging from ₹1,502 apiece to the present level of ₹4,737.
In the last five-year period, the company's shares have seen a meteoric rise of over 520%, and they have produced a staggering return of nearly 10000% in the last ten-year period, appreciating from ₹47 apiece to ₹4,737.
The stock has so far in 2023 gained 16.17%, outperforming the Nifty 50 index, which recorded a negative return of 2.08% during the same period.
The company primarily focuses on fluorine chemistry, producing refrigeration gases, chemicals, inorganic bulk fluorides, specialty organofluorines. It also offers contract research and manufacturing services.
Navin Fluorine produces over 60 fluorinated products for domestic and international customers. More than 40% of their products are exported to North America, Europe, the Middle East, and the Asia-Pacific regions. Its manufacturing units are strategically located near ports to facilitate the import of raw materials and the export of finished products.
Brokerage firm HDFC Securities expects the stock to continue its upward trend despite already making significant gains. In its latest institutional research note, the brokerage maintained its 'buy' rating on the stock with a target price of Rs. 5,471 per share, which represents a potential upside of 15.50% from the current market price.
HDFC Securities cited several factors for its bullish outlook, including strong earnings visibility due to long-term contracts, a shift in sales mix towards better margin products, growth through capacity expansion, and a robust research and development infrastructure.
"We recently visited the plant of Navin Fluorine Advanced Sciences Ltd. (NFASL), a wholly owned subsidiary of NFIL, located in Dahej, Gujarat," said HDFC Securities. “The plant is designed with a sustainable philosophy, considering the various regulations imposed now and in the future in terms of safety, environment, waste management, and structure,” it added.
The plant is a self-sustainable unit that can produce all of its raw materials in-house in case of any disruption at its supplier's end, ensuring business continuity. The plant is operating at optimum capacity utilization and manufactures both intermediate and final products for Honeywell, delivering them according to their requirements, said the brokerage.
HDFC Securities further added, "The contract with Honeywell secures the net profit margin for NFASL and is a complete cost pass-through contract." The company is also in the process of debottlenecking the plant, which will expand its capacity by 20%, it noted.
Further, this new multipurpose plant (MPP) is designed to produce five intermediates or advanced intermediates for agrochemical intermediates (AI) and for active pharmaceutical ingredients (API).
According to HDFC Securities, Navin Fluorine International Limited (NFIL) is expected to witness an improvement in its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin, which is likely to increase by 636 basis points from 27% in FY23E to 33% in FY25E. This growth can be attributed to the increase in value-added products in the company's product portfolio, which have superior margins.
HDFC Securities further predicts that NFIL's Profit After Tax (PAT) is expected to grow at a CAGR of 47% over FY23-25E, driven by a 47% CAGR in EBITDA.
20 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
