Fluorochemicals

Sector Report

Champions of magicis elementum!

Swarnendu Bhushan [email protected] 91-22-6632 2260
 Fluorochemicals

THIS PAGE IS INTENTIONALLY LEFT BLANK

September 15, 2023 2

 Fluorochemicals

Contents

Page No.

Life Sciences: Increased usage of fluorination ...................................................... 7

Agrochem: Sequential market share gain .............................................................. 9
Fluoropolymers: New age solutions ..................................................................... 10
Refrigerants: Age old to new age solutions ......................................................... 13
Summary of Valuations and recommendations ................................................... 15
NFIL: Focused and fast paced ......................................................................... 15
SRF Limited: A bit of everything ....................................................................... 15
GFL: Furthering its presence in new age fluoropolymers ................................. 15
Key Risks ............................................................................................................. 17
Unknown toxicity is key risk for all fluorination companies ............................... 17
Upcoming competition:..................................................................................... 17
Technology risk: ............................................................................................... 17
Access to key raw materials is an issue ........................................................... 18
COMPANIES ....................................................................................................... 19
Navin Fluorine International
Story in Charts ..................................................................................................... 21
Navin Fluorine – Pioneer in organic fluorine ........................................................ 22
Business Overview........................................................................................... 22
Investment Rationale ........................................................................................... 23
CDMO - cGMP4 a key growth driver ................................................................ 23
HPP to offer huge scope of growth and scalability ........................................... 23
Specialty chemicals to witness 35% revenue CAGR ....................................... 24
Backward integration & new vertical give growth visibility ................................ 25
Financial Analysis ................................................................................................ 26
Valuations ............................................................................................................ 28
Key Risks ......................................................................................................... 28
Annexure ............................................................................................................. 29
Gujarat Fluorochemicals
Story in Charts ..................................................................................................... 33
GFL - Leading fluoropolymers producer .............................................................. 34
Business Overview........................................................................................... 34
Product Profile.................................................................................................. 35
Investment Rationale ........................................................................................... 36
Entry into new age fluoropolymers to propel top-line ....................................... 36
High entry barriers & rising PTFE demand to sustain volume growth ........... 36
PTFE prices expected to remain under pressure ......................................... 36
New age fluoropolymers – Key growth driver ............................................... 37
Fluorochemicals story intact ............................................................................. 37
Vertical integration across value chains- a key strength .................................. 38
Focus on New Age applications ....................................................................... 39
Electric vehicle batteries: .............................................................................. 39
Lithium Ion Battery & electrolyte salts: .......................................................... 39
Solar panels:................................................................................................. 40

September 15, 2023 3

 Fluorochemicals

Page No.

Bulk Chemicals: Slow growth, no capex plans in near term ............................. 41

Financial Analysis ................................................................................................ 42
Revenue CAGR of 10% over FY23-FY26E led by volumes ............................. 42
Valuation.............................................................................................................. 44
Key Risks ......................................................................................................... 44
Annexure ............................................................................................................. 45
SRF
Story in Charts ..................................................................................................... 49
SRF – Fluorospecialty brightens outlook ............................................................. 50
Business Overview: .......................................................................................... 50
Investment Rationale ........................................................................................... 51
Chemicals segment - The key growth driver .................................................... 51
Uncertainty expected in packaging business ................................................... 52
Technical Textiles facing headwinds ................................................................ 53
Financial Analysis ................................................................................................ 54
Valuations ............................................................................................................ 56
Key Risks ......................................................................................................... 56
Annexure ............................................................................................................. 57

September 15, 2023 4

 Fluorochemicals
Sector Report
September 15, 2023 Champions of magicis elementum!
Navin Fluorine International (NFIL IN)
Rating: Acc | CMP: Rs4,544 | TP: Rs5,064 It took more than seven decades to isolate the magicis elementum - Fluorine,
Key Financials - Consolidated an effort that landed the French chemist Henri Moissan with a Nobel in 1906.
Y/e Mar FY23 FY24E FY25E FY26E Since then, there has been no looking back for fluorinated chemicals, with
Sales (Rs. m) 20,774 24,626 30,995 36,534 increasing applications in refrigeration, life sciences, agrochem and
EBITDA (Rs. m) 5,503 6,434 8,363 9,868 polymers. We believe that Indian fluorochemical companies are well placed
Margin (%) 26.5 26.1 27.0 27.0
to capitalize on growing fluorination demand in mass markets given 1) global
PAT (Rs. m) 3,752 4,244 5,736 6,811
EPS (Rs.) 75.7 85.7 115.8 137.5 refrigerant market to expand at 6.4% CAGR over FY23-28E (to reach USD9bn
Gr. (%) 42.6 13.1 35.2 18.7 by 2028) 2) remarkable 64% of New Chemical Entities (NCEs) approved by
DPS (Rs.) 12.0 13.6 18.3 21.8 Food & Drug Administration (FDA) in CY22 made use of fluorination
Yield (%) 0.3 0.3 0.4 0.5
chemistry, almost double of 34% witnessed in CY15 3) 11 out of 15 new ISO
RoE (%) 18.6 18.0 20.6 20.6
RoCE (%) 19.6 17.3 20.4 21.3 assigned agrochemicals in 2022 had fluorination in their chemistry compared
EV/Sales (x) 11.2 9.5 7.5 6.4 to 6 out of 17 in 1998 and 4) fluoropolymers finding applications in newer
EV/EBITDA (x) 42.4 36.4 28.0 23.6 areas like battery membranes & solar films. While fluorochemicals are
PE (x) 60.0 53.0 39.2 33.1
battling lack of consistent data, user industries like pharma and
P/BV (x) 10.3 8.9 7.4 6.3
agrochemicals with size of USD516bn and USD228bn in CY22 are expected
Gujarat Fluorochemicals (FLUOROCH IN)
to grow by 7.7% & 3.0% CAGR respectively in CY23-30.
Rating: Acc | CMP: Rs3,125 | TP: Rs3,230
Key Financials - Consolidated
Considering strong potential upside and huge demand uptick in the industry,
Y/e Mar FY23 FY24E FY25E FY26E
we initiate coverage on 3 fluorochemical companies: Navin Fluorine
Sales (Rs. m) 56,847 50,171 69,942 76,298
EBITDA (Rs. m) 19,653 14,865 22,771 24,882
International Limited (NFIL) with ‘Accumulate’ rating at TP of Rs 5064 valuing
Margin (%) 34.6 29.6 32.6 32.6 at 40x Sep’25 EPS of Rs 127, Gujarat Fluorochemicals Limited (GFL) with
PAT (Rs. m) 12,470 8,582 13,702 14,685 ‘Accumulate’ rating at TP of Rs 3230 valuing at 25x Sep’25 EPS of Rs129 and
EPS (Rs.) 113.5 78.1 124.7 133.7
SRF limited (SRF) with ‘Hold’ at TP of Rs 2143 valuing at implied consol
Gr. (%) 58.4 (31.2) 59.7 7.2
DPS (Rs.) 3.4 3.1 6.2 6.7
Sep’25 EV/EBITDA of 11x).
Yield (%) 0.1 0.1 0.2 0.2
RoE (%) 25.5 14.5 19.6 17.6 Lifescience & Agrochem to grow faster than user industries : Fluorinated
RoCE (%) 27.0 16.0 21.9 19.8
EV/Sales (x) 6.3 7.1 5.1 4.6
molecules find increased usage in both life sciences and agrochemical applications
EV/EBITDA (x) 18.1 23.9 15.6 14.1 due to unique properties of a strong C-F bond namely 1) lower vulnerability to bio-
PE (x) 27.5 40.0 25.1 23.4 degradation by stomach enzymes thereby ensuring higher bio-availability at target
P/BV (x) 6.2 5.4 4.5 3.8 receptors, 2) better penetration of cell membranes, thereby increasing the
SRF (SRF IN) absorption - a property called as lipophilicity, 3) ability to lower the acid tolerance of
Rating: HOLD | CMP: Rs2,371 | TP: Rs2,143 bacteria, thereby helping as anti-bacterial agent. Due to higher acceptance, we
Key Financials - Consolidated expect usage of fluorinated drugs to significantly outgrow user industries like
Y/e Mar FY23 FY24E FY25E FY26E pharma and agrochemicals at 7.7% and 3.0% CAGR.
Sales (Rs. m) 1,48,703 1,40,029 1,59,142 1,75,905
EBITDA (Rs. m) 35,292 31,115 35,902 41,340
Margin (%) 23.7 22.2 22.6 23.5 Fluoropolymers - Increased usage in new-age application: Fluoropolymers are
PAT (Rs. m) 21,623 16,817 19,324 22,243 finding increased usage in automobiles, electrical and electronics and new energy
EPS (Rs.) 72.9 56.7 65.2 75.0
applications like energy harvesting, sensors, 5G etc. due to 1) higher chemical
Gr. (%) 14.5 (22.2) 14.9 15.1
DPS (Rs.) 8.8 6.8 7.8 9.0 resistance, 2) better insulation properties, and 3) stability at wider range of
Yield (%) 0.4 0.3 0.3 0.4 temperature and pressure. PTFE (polytetrafluoroethylene), accounting for ~60% of
RoE (%) 22.9 15.2 15.3 15.4 global fluoropolymers is expected to grow at ~5% CAGR till 2030. PVDF
RoCE (%) 22.1 15.2 15.4 15.8
(polyvinylidene difluoride), the second largest accounting for ~20% of total
EV/Sales (x) 4.9 5.3 4.7 4.2
EV/EBITDA (x) 20.8 23.7 20.7 18.1 fluoropolymer consumption, is expected to grow from 67,000 mtpa in CY22 to
PE (x) 32.5 41.8 36.4 31.6 150,000 mtpa in CY32. However, it may be noted due to ongoing research and wide
P/BV (x) 6.8 6.0 5.2 4.5 scale adoption of fluoropolymers demand may easily outgrow these forecasts.

Swarnendu Bhushan Refrigerants – Permanence across generations: Fluorine gases have been an
[email protected] | 91-22-66322260 integral part across generations of refrigerants as we move to find gases that are
more environment friendly given its 1) unique property of liquefaction at ambient
temperature and modest pressure, 2) inert, un-flammable and unreactive nature,
and 3) low toxicity. Global refrigerant market is expected to rise by CAGR of 6% to
USD9bn by 2028.

September 15, 2023 5

 Fluorochemicals

Properties of Fluorine

LIFE SCIENCES
64% of NCEs approved in
CY22 had fluorination

Lipophilicity
High bio-availability
Anti-bacterial

POLYMERS Lipophilicity
Applications in new Improved binding
AGROCHEM
industries like
electrolyzers, solar cells,
semi-conductor
High chemical resistance
F 11 out of 15 new
agrochem in CY22 had
fluorination
High weather stability
manufacturing
Low surface energy
Low co-efficient of friction
Low di-electric constant
Higher hydrophobicity
Low toxicity
Low flammability
High volatility
High chemical/thermal stability

REFRIGERANTS
New age refrigerants like
HFOs are also fluorine
based

Source: Industry, PL

September 15, 2023 6

 Fluorochemicals

Life Sciences: Increased usage of fluorination

Fluorine makes a strong bond with carbon. Due to this strong C-F bond, fluorinated
drugs are less susceptible to bio-degradation by stomach enzymes and have higher
bio-availability at the target receptors. Fluorinated drugs also penetrate the cell
membranes easily, thereby increasing the absorption (a property called as
lipophilicity). Fluorine also lowers the acid tolerance of bacteria, thereby helping as
anti-bacterial agent.

 Gaining market share in new drugs: Fluorine has found ever-increasing

usage in life sciences, due to its several properties. In CY22, a total of 22 NCEs
(New Chemical Entities) were approved by FDA. A whopping 14 out of these
(64%) made use of fluorination in their chemistry, a sharp rise from 34%
witnessed in CY15. Furthermore, Atorvastatin, the largest selling drug of all
times also makes use of fluorination.

While different studies put different outlook on market size of fluorinated drugs,
the fact that increasing number of drugs are fluorinated combined with no
particular concentration in therapeutic areas spells a promising future for
fluorination in life sciences.

 NFIL - Best positioned in the segment: NFIL’s Contract Development and

Manufacturing Organization (CDMO) segment in particular is expected to
benefit after foraying in almost all big pharma companies globally through its
acquisition of Manchester Organics, UK in 2011. Additionally, CDMO has
grown at 12% CAGR over FY18-23. The company has three cGMP plants but
aims to complete cGMP4 by CY24-end. This would further bolster its capability
to service larger quantities. It proudly claims to work only with innovator
companies in the segment. Additionally, some part of its Specialty chemicals
segment also caters to life sciences.

Top 10 drugs in CY22 had 6 biological GFL, on the other hand, does not have any presence in life sciences as of now,
drugs, out of rest 4, two (Paxlovid,
while SRF does not separately publish its exposure to life sciences. It is
Biktarvy) were fluorinated with sales of
USD 29bn. included in the broader Chemicals segment which contributed ~50% of
revenues in FY23. It is generally believed that 10% of specialty chemicals
under chemicals segment caters to life-sciences. SRF also appears to be
starting a CDMO segment for pharma soon.

Fluorination finds increasing usage in drugs

64% of NCEs approved in 2022 made
use of fluorination in their chemistry
Fluorinated NCEs (%)
63.6
50.0
43.2
34.5
28.8
28.6
27.6

27.5
25.6

25.0

25.0
23.1
22.7
22.6

22.2
18.2

15.4
15.2
14.7

14.3
14.0

13.9
13.3
12.8

11.5
11.4

10.0

10.0
8.3
8.1

7.1
5.9
1991
1992
1993
1994
1995
1996

2000
2001
2002
2003
2004
2005

2009
2010
2011
2012
2013
2014

2018
2019
2020
2021
2022
1997
1998
1999

2006
2007
2008

2015
2016
2017

Source: Industry, PL

September 15, 2023 7

 Fluorochemicals

Contribution of fluorinated drugs (%) Outlook on Life sciences market size (USD bn)
Skin disease
remedies 2022 2030
13.5

484.3
Anti-f ungal 600.0

185.0
reagents 500.0
400.0

83.2
51.4
10.6 300.0

24.4
21.4

15.5
16.0
2.7
1.6
200.0
100.0
Others 0.0

Skin disease

Anti-tumour

Antipsychotic
Anti-fungal

Gastro/metabolism
52.8

reagents
Anti-tumour

remedies
9.4

Gastro/metabolism
7.0
Antipsy chotic
6.7

Source: Industry, PL Source: Industry, PL

NFIL’s life sciences contribution (%) SRF’s revenue breakdown

CDMO Chemicals Bu sin ess (CB ) Packaging Film B usi ness (PFB)
Technical Textile Business (TTB) Others
Specialty Chemicals
4% 3% 3% 3% 3% 3% 3%
High Performance Products (HPP)
15% 17% 13% 14% 12% 12%
19%

27%
14 14

29%
17 16

29%
19 22

35%
29 25 24
39%

38%
36%

31 37 36 43 48 51
26 40 39

58%
56%
55%
50%
43%

42%
41%

45 50 46 43 41
35 37 37 35

FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

SRF’s Chemicals Business (FY23)

Industrial Traded + Other

Chemicals Op Inc
6% 2%

Refrigerant Gas Specialty

36% Chemicals
56%

Source: Company, PL

September 15, 2023 8

 Fluorochemicals

Agrochem: Sequential market share gain

To feed an ever-growing population, crop protection and high yields are of utmost
importance amidst a limit on arable land. Properties that make fluorine attractive for
pharmaceuticals, also make them important for agrochemicals. The ability of
fluorine and fluorinated functional groups to alter the physiochemical properties like
acidity, lipophilicity and stability of a parent molecule has resulted in ever-increasing
usage in agrochemicals.

 Increasing market share in agrochemicals: In 2022, 11 out of total 15 new

ISO assigned agrochemicals made use of fluorination chemistry. During 2012-
22, 65% of all newly assigned ISOs in agrochemicals had fluorination in their
chemistry, much higher than 55% during 2002-11.

 NFIL’s focus on agrochemicals: GFL is not present in agrochemicals. NFIL’s

specialty segment caters to agrochemicals. It is completing a dedicated plant
of INR5.4b for an agrochemical intermediate by CY23-end. This along with
another intermediate goes into making an Active Ingredient (AI). NFIL recently
announced Rs 300mn project for the other intermediate too. Its Multi-Purpose
Plant (MPP) has currently four products- three in agrochemical segment and
one in pharma. NFIL is also expected to launch fifth product from MPP in
H2CY24, which would be in the agrochemical segment.

 SRF aims at more AIs: SRF has two large AIs as of now, P17 accounting for
17% of overall chemical segment and P32 (non-fluorinated) accounting for
11% of specialty chemicals. It intends to launch 6-7 AIs in next couple of years.

 “Forever chemicals”: Bio-accumulation is also an increasing concern; as

most fluorinated agrochemicals take much longer to degrade. Hence they are
termed as ‘Forever Chemicals’. Pollution of the water table as a result is an
issue that scientists have started studying in detail.

Fluorination in new ISO assigned agrochemicals

A record 73% of newly assigned ISOs
for agrochemicals in 2022 made use
% fluorinated agrochem
of fluorination
100.0
100.0

87.5
85.7
75.0
75.0

73.3
71.4

70.0
69.2

68.4
66.7
61.5

61.1
58.3

57.1
43.5

42.9
41.2
40.0

40.0

38.9
38.5
35.3

33.3
1998
1999
2000
2001
2002
2003
2004
2005

2019
2020
2021
2022
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

Source: Industry, PL

September 15, 2023 9

 Fluorochemicals

Fluoropolymers: New age solutions

Fluorpolymer is a class of polymers with fluorine atoms in their chain. A strong C-F
bond not only helps in unique properties to life sciences and agrochemicals as
mentioned above, but also results in a wide range of high performance plastics with
outstanding chemical resistance, weather stability, low surface energy, low co-
efficient of friction, low di-electric constant, higher hydrophobicity among others. In
total, fluoropolymers consumption stood at 320,000mtpa in FY23 and is expected
to grow at 5% going forward.
First commercial usage of PTFE was
in the Manhattan project as anti-  Unique properties of PTFE (Poly tetra fluoro ethylene): PTFE, accounting
corrosive material for ~60% of total fluoropolymer consumption, is similar to polyethylene except
that all H atoms are replaced by F atoms. The replacement results in a compact
crystalline structure, making PTFE the heaviest polymer with a high melting
point of ~320degC. Fluorination also gives PTFE strong chemical resistance,
making it insoluble in any organic solvent. Fluorination also renders PTFE with
high thermal stability, showing no obvious thermal degradation below
440degC. PTFE requires almost pure oxygen atmosphere for combustion. As
a result, it is used as a flame suppressant.

Fluoropolymers find increased usage  PTFE’s global market stands at ~175,000mtpa: Globally, China is the largest
in new applications like electronics,
producer of PTFE but 80% of that is consumed domestically. GFL currently
solar, and batteries among others
has 18,000mtpa PTFE capacity and does not compete with China for ~85% of
its products. Both SRF and Navin Fluorine have also expressed intentions to
diversify into PTFE. Global PTFE market is expected to grow at 5% over CY22-
30.

 PVDF, the next big product: PVDF’s current global consumption of

67,000mtpa is expected to rise to 152,000mtpa by CY32. It is primarily used
as a binder for electrodes in lithium ion batteries, main driver of growth for
PVDF. Other usages are in solar panels and water treatment membranes.
Largest players in PVDF are Dongyue, Daikin, Arkema among others.

 Other significant fluoropolymer FKM (Fluorine Kautschuk Material): It is

a fluoro-elastomer and finds wide usage as replacement of rubber in highly
corrosive or high temperature/pressure environment, typical usage being in
aeronautical industry, automotive etc. The base monomer is VDF. Global
market appears to be 40-45,000mtpa.

 PFA (Perfluoroalkoxy alkanes) is another fluoropolymer with a much smaller

but specialized market of 10-15,000mtpa. It is the highest priced TFE derived
polymer and finds applications in the semi-conductor industry among others.

 GFL, the largest player under coverage in fluoropolymers: GFL has a total
capacity of 1,100mtpm of new fluoropolymers and intends to raise it to
1,500mtpm by FY24 end and subsequently to 1,800mtpm. Total
fluoropolymers capacity is expected to be 3550mtpm in FY26E. SRF also
appears to have announced its foray into fluoropolymers, while NFIL is
expected to follow suit subsequently.

September 15, 2023 10

 Fluorochemicals

Properties and usage of various fluoropolymers

Tensile Break Dielectric Application
Melting point
Modulus elongation strength temperature Main applications Major global players
(degC)
(MPa) (%) (kV/mm) (degC)
chemical processing, AGC, DuPont, Chemours,
PTFE 317-337 660 300-550 19.7 -240 to 260
wires & cables Solvay, Daikin
barrier films, packaging &
PCTFE 210-215 60-100 100-250 19.7 -240 to 200 Daikin, Hoechst, Arkema
sealing
FEP 260-282 345 ~300 19.7 -240 to 200 cable insulation DuPont, Daikin
PVF 190-200 2000 90-250 12-14 -70 to 110 lamination, film & coating DuPont
coating, wire, cable
PVDF 155-192 1,040-2,070 50-250 63-67 -20 to 150 Arkema
electronics
ECTFE 235-245 240 250-300 80 -70 to 150 flame resistant insulation Solvay
chemical resistant AGC, DuPont, Solvay,
PFA 302-310 276 ~300 19.7 -268 to 260
components Daikin
ETFE 254-279 827 150-300 14.6 -200 to 150 wire & cable insulation AGC, Daikin
THV 145-155 82-207 500-600 48-62 -50 to 93 barrier films & insulation DuPont, Solvay, Arkema
FKM 220 17 600 14 -26 to 230 gaskets, sealants Chemours, Daikin

Source: Industry, PL

Global market size of various fluoropolymers (mtpa)

PFA Others
15,000 10,000

FKM
45,000

PTFE
1,75,000

PVDF
75,000

Source: Industry, PL

Consumption of various fluoropolymers in the US (%)

Building & Others

construction 6.5
Medical 3.2
3.9
Electronics
Energy 31.0
5.2

Consumer products
9.7

Chemical/Industrial
processes
16.1 Transportation
24.5

Source: Industry, PL

September 15, 2023 11

 Fluorochemicals

Usage of various fluoropolymers in electronics segment

Source: Industry, PL

Magenta: in wide use commercially / Orange: trials or early stages / Dark grey: speculative research / Yellow: Formulations with
largest electric/electronic market value

September 15, 2023 12

 Fluorochemicals

Refrigerants: Age old to new age solutions

Refrigeration is simply moving heat from a specific place and throwing it out
somewhere else. It needs two basic steps- heat absorption and heat rejection. So
a refrigerant gas needs to be liquefied easily at ambient temperature using
moderate pressure. Its subsequent expansion absorbs a lot of latent heat
converting it into gas, thereby resulting in a drop of temperature. Initially refrigerants
included methyl chloride, ammonia and sulphur chloride. However, these are
flammable, toxic and highly reactive, hence the need for next generation of
refrigerants.

 Permanence of fluorine across generations: Fluorine gases have the

unique property of liquefaction at ambient temperature at modest pressure.
Additionally, they are inert, have low toxicity, are unflammable and unreactive,
making way for the second generation of refrigerants consisting of
chlorofluorocarbons (CFCs) and hydrochlofluorocarbons (HCFCs). However,
subsequent development of understanding on damage to the environment
resulted in ban on refrigerants with potential of ozone depletion (ODP). Third
generation of refrigerants included hydrofluorocarbons (HFCs), but they were
found to have high global warming potential (GWP).

 Montreal Protocol (1987) aimed at phasing out ozone depleting substances

(ODS). With it came nine amendments, finally culminating into the Kigali
agreement of 2016 which targeted phasing out of HFCs which although were
not ODS but were high on GWP.

 Fourth generation of refrigerants: New age refrigerants like hydrofluoro

olefins (HFOs) have a C=C bond which degrades in the atmosphere in a few
weeks, resulting in low GWP. Comparatively, HFCs remain in the atmosphere
for tens and hundreds of years. Various kinds of HFOs are HFO-1234yf, HFO-
1234ze and HFO-1233zd.

 Globally refrigerants market is estimated to be USD 6.3bn and is expected to

rise at CAGR of 6% to USD9bn by 2028. Global refrigerant market is expected
to be 2mmtpa in 2023 and is expected to rise by 2.5% CAGR through 2028.

 NFIL has already joined the bandwagon for HFOs: NFIL has tied up with
Honeywell for supply of HFO. It is a seven-year contract which started in FY23.
Debottlenecking of the plant is expected to be completed by CY24-end and the
company is also under discussion with Honeywell for doubling the capacity.
NFIL has also started a 5,000mtpa R32 plant recently. SRF has also developed
an indigenous technology for manufacturing HFO-1234yf and the production is
expected in a couple of years. GFL was earlier expected to come up with R32
capacity but appears to have put it on hold.

 New age refrigerant is an evolving area: Although HFOs degrade quickly,

they disintegrate into TFA (tri fluoro acetic acid). TFA accumulates into water
bodies and is nearly impossible to separate out. This may force look out for
alternate refrigerants. Other non-fluorinated refrigerants like isobutane are also
finding increased usage.

September 15, 2023 13

 Fluorochemicals

Kigali agreement to phase out HFCs by groups of countries

Source: Industry, PL

Distribution of fluorspar reserves globally (%) China & Mexico dominate mining of fluorspar (%)
US Spain Vietnam Others
1.6 1.9 2.7 5.2
Others China
21.4 19.0 S Af rica
5.1
Mongolia
4.2
Vietnam Iran
1.9 1.3
Spain Mexico
3.9 11.7

Iran
S Af rica Mexico 0.6
15.9 26.4 China
68.7
Mongolia
8.5

Source: Industry, PL Source: Industry, PL

Fluorspar prices exhibit high volatility

4500
3775
4000 3500
3325
3500 3130
2775
3000
2425
(CNF/MT)

2500 2775
2000 2325 2425
2075
1500
1000
500
0
Apr-16

Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22
Aug-20

Aug-21

Aug-22
Aug-16

Aug-17

Aug-18

Aug-19

Source: Bloomberg, PL

September 15, 2023 14

 Fluorochemicals

Summary of Valuations and recommendations

NFIL: Focused and fast paced

 The proportion of vintage refrigerants (R22/R32) is expected to decline from

28% in FY18 to ~9-10% in FY26E. Debottlenecking of HFO capacity by 25%
is expected to be completed by CY24-end, while the company is also in
negotiation with Honeywell for doubling of the contract volume.

 The dedicated Rs 5.4bn agrochem plant is expected to come up by Dec’23 and

would take another 3-4 years for full ramp up. In the Multi-Purpose Plant (MPP),
the company is expected to launch fifth product (agrochem) in 2HCY24.

 In the CDMO (Contract Development and Manufacturing Organization)

segment, the company intends to focus on late entry products. Completion of
cGMP4 by CY24-end would further help it to execute larger projects for pharma
innovator companies. We forecast EPS CAGR of 22% during FY23-26E. The
stock is trading at ~54x FY24E EPS. Considering strong potential of upcoming
projects, we initiate coverage with a ‘Accumulate’ rating and TP of Rs 5064
valuing at 40x Sep’25 EPS of Rs 127. Delayed project execution, uncertain
demand and rise in competition are key risks to our recommendation.

SRF Limited: A bit of everything

 SRF is expanding its refrigerants capacity by 35% to 84500 mtpa (overall) by

FY24E and has also developed its own process technology for HFO which
would aid its revenue growth upon expiry of patents.

 60-70% of specialty chemicals business comes from agrochemicals. The

company aims to launch 6-7 AIs in next 2-3 years which would topline growth
of the company.

 We are optimistic on the company given healthy performance from specialty

chemicals business, strong balance sheet and deployment of capex for high-
growth specialty chemicals business over next few years to tap opportunities
emerging from agrochemical and pharma industries. We expect
Revenue/EBITDA/PAT to grow at CAGR of 6%/5%/1% over FY23-26E.

 The stock currently trades at 24x FY24 EV/EBITDA and 42x FY24 EPS and
does not leave much upside for the investors. We initiate coverage with ‘HOLD’
rating and SOTP based target price of Rs 2413 given high growth from
specialty & fluorochemical business on the back of improved business outlook.

GFL: Furthering its presence in new age fluoropolymers

 GFL’s strategic focus on new fluoropolymers such as PVDF, PTFE, FKM, PFA
and battery chemicals makes it a unique and compelling proxy play on multiple
new-age technologies like EVs, solar energy, 5G etc with huge growth
potential.

 With increasing usage of fluorine in agrochemicals, pharmaceuticals and life

science materials, fluorine chemistry is in a sweet spot globally.

September 15, 2023 15

 Fluorochemicals

 Further, fluoropolymers are extensively used in battery for separators, wirings

and battery casing due to superior performance. Similarly, PVDF sheets are
used in solar panels and find use in 5G equipment too. The production of green
hydrogen, which is looked upon as future energy source, also uses multiple
products from the fluorine basket. These segments are likely to drive growth of
the company.

 We estimate Revenue / PAT CAGR of 10%/6% and EBITDA margins of 32%

(with reasonable probability of upsides) and ~15% RoCE over FY23-FY26E.
We initiate coverage on Gujarat Fluorochemicals Ltd with a ‘Accumulate’ rating
and target price of Rs3,230 valuing the stock at 25x Sep’25 EPS of Rs129.
(P/E multiple).

September 15, 2023 16

 Fluorochemicals

Key Risks
Unknown toxicity is key risk for all fluorination companies

Carbon-Fluorine (C-F) bond is too strong to be broken by natural forces. Hence,

per and poly-fluoro alkyl substances (PFAS), a class of chemicals referred to as
“forever chemicals”, accumulate in the environment after escaping from producing
factories and users alike. Several of these have been proven to be carcinogenic
and detrimental for immune systems. Most importantly, several others have not
even gone through toxicology studies.

Some of the proven forever chemicals like PFOS (per fluoro octane sulfonic acid),
PFOA (per fluoro octanoic acid) and PFHxS (per fluoro hexane sulfonic acid) have
been banned internationally in 2009, 2019 and 2022 respectively. Even the new
age refrigerants- HFOs have come under scanner as these molecules break up into
TFA (tri fluoro acetic acid), which is not proven to be a toxic so far, but poses
extreme difficulty in removal from water.

As a result, European Chemicals Agency (ECHA) has put forward a proposal in

Feb’23 that could see heavy restriction on production of more than 12,000 forever
chemicals. The severity of the issue can be well gauged from recent multi-billion
settlements of Chemours, DuPont, Corteva and 3M over these chemicals.

Upcoming competition:

While GFL has positioned itself largely as a fluoropolymer player, the other two
have also expressed their intention to foray into the segment. Additionally,
upcoming large producers of green energy like RIL with its Giga factories have
expressed intention for fully integrated products including battery chemicals. Last
year, China alone appears to have added ~70mmtpa of nameplate PVDF capacity.

In fluorination chemistry also, there is a risk of new entrants. Anupam Rasayan has
bought 26% stake in Tanfac which would help it in secured supply of AHF. Laxmi
Organics and Deepak Nitrite also appear to be foraying into fluorination.

Technology risk:

New age applications like semi-conductors, batteries and new energy are evolving
as we speak. While several fluoropolymers are finding increased usage, there is
always a risk of new materials displacing fluoropolymers, more so as volumes rise
and bio-accumulation becomes a concern.

In refrigerant also, HFOs disintegrate into TFA. It is nearly impossible to separate

TFA from water. So far, it has not been banned but there are studies going on which
may risk the usage of HFOs.

September 15, 2023 17

 Fluorochemicals

Access to key raw materials is an issue

 Limited availability of fluorspar: Access to reliable fluorine source (acid

grade fluorspar) is a critical requirement, especially for Indian fluorination
companies considering the fact that India has no commercially proven reserve
of fluorspar. Fluorspar reserves are mainly concentrated in Mexico, China and
South Africa which account for ~60% of global reserves (2022). When it comes
to mining of fluorspar, China accounts for 69% of the market, while Mexico
accounts for another 12% (2022).

 Due to concentrated availability, fluorspar prices are very volatile and secured
access becomes a key determinant for sustainable business.

 SRF lacks strategic sourcing of fluorspar: Both NFIL and GFL have a JV
with Gujarat Mineral Development Corporation, known as Swarnim Gujarat
Fluorspar which enables them easy access of acid grade fluorspar. NFIL has
recently announced expansion of its AHF capacity from 20,000 mtpa to 60,000
mtpa at cost of Rs4.5bn. SRF does not appear to have any strategic sourcing
for fluorspar, however has largest HF capacity.

September 15, 2023 18

 Fluorochemicals

COMPANIES

September 15, 2023 19

 Navin Fluorine International (NFIL IN)
Rating: ACCUMULATE | CMP: Rs4,544 | TP: Rs5,064

September 15, 2023 CDMO, the key driver

Company Report We initiate coverage on Navin Fluorine International Ltd (NFIL) with
‘Accumulate’ rating and TP of Rs 5,064 valuing at 40x Sep’25 EPS of Rs 127.
We believe NFIL presents an attractive investment opportunity led by 1)
growing emphasis in CDMO (Contract design manufacturing organisation)
with completion of cGMP4 by CY24-end, enabling the company to service
Key Financials - Consolidated larger quantities, 2) launch of new molecules from MPP (multi-purpose plant)
Y/e Mar FY23 FY24E FY25E FY26E
and the dedicated Rs5.4bn agrochemical plant, 3) growth in HFO (hydrofluoro
Sales (Rs. m) 20,774 24,626 30,995 36,534
EBITDA (Rs. m) 5,503 6,434 8,363 9,868 olefins) with debottlenecking of 25% by CY24-end and possibility of further
Margin (%) 26.5 26.1 27.0 27.0 expansion, and 4) possibility of venturing into fluoropolymers as new vertical.
PAT (Rs. m) 3,752 4,244 5,736 6,811
EPS (Rs.) 75.7 85.7 115.8 137.5
We expect Revenue/PAT CAGR of 20%/22% and margins of 27% over FY23-
Gr. (%) 42.6 13.1 35.2 18.7 26E. The company is tripling its 20,000mtpa HF (hydrofluoric acid) capacity
DPS (Rs.) 12.0 13.6 18.3 21.8
over next two years along with backward integration, thereby aiding
Yield (%) 0.3 0.3 0.4 0.5
RoE (%) 18.6 18.0 20.6 20.6 expansions. The stock is currently trading at 53x FY24E EPS. Initiate with
RoCE (%) 19.6 17.3 20.4 21.3 ‘Accumulate’
EV/Sales (x) 11.2 9.5 7.5 6.4
EV/EBITDA (x) 42.4 36.4 28.0 23.6
PE (x) 60.0 53.0 39.2 33.1 CDMO- A key growth driver: NFIL works only with innovator companies. The
P/BV (x) 10.3 8.9 7.4 6.3
company is looking to add cGMP4 facility by CY24 end which would help it service
late-stage molecules with larger quantities from clients. The company has also
started looking at non-fluorinated chemistry like the recent deal with Fermion, in
order to increase its wallet-share with clients. In this segment, the company has
clocked 12% CAGR over FY18-23. With the visibility that we have now, we build in
Key Data NAFL.BO | NFIL IN
a conservative 5% CAGR in CDMO revenue over FY23-26E. However, the inherent
52-W High / Low Rs.4,950 / Rs.3,765
Sensex / Nifty 67,839 / 20,192 nature of the business is such that likelihood of surprise is high with focus on late
Market Cap Rs.225bn/ $ 2,708m
stage molecules.
Shares Outstanding 50m
3M Avg. Daily Value Rs.786.18m

HPP segment to offer scalability & growth visibility: Demand of HFO in CY23
has been cut down ~20% by Honeywell and is expected to normalize next year,
which would be followed by 25% capacity debottlenecking by CY24 end. The
company is also in discussion to further raise offtake with customers. It is also
Shareholding Pattern (%)
coming up with ~5,000mtpa capacity (R32) in a few days. Over FY18-FY23, the
Promoter’s 28.81
Foreign 18.50 segment has grown by 18% CAGR, however we expect 13% CAGR over FY23-
Domestic Institution 25.97 26E primarily led by HFO demand normalization & capacity debottlenecking.
Public & Others 26.72
Promoter Pledge (Rs bn) -
Specialty chemicals- Higher agrochemical concentration: NFIL has already
launched three agrochemical products in its MPP plant in addition to one pharma
intermediate. The fifth molecule is expected to launch in H2CY24. The Rs5.4bn
dedicated agrochemical plant is also expected to be completed by Dec’23.
Stock Performance (%)
Accordingly, we expect ~35% revenue CAGR over FY23-26E (v/s 27% CAGR seen
1M 6M 12M
Absolute 1.4 8.8 (5.5)
during FY18-23).
Relative (2.3) (7.7) (16.5)

Backward integration & new vertical provides growth visibility: Although the
Swarnendu Bhushan company does not have any presence in fluoropolymers as of now, it has stated its
[email protected] | 91-22-66322260
intent to venture into new age applications of fluoropolymers like batteries,
electronics and renewable energy. This is a fast emerging field and availability of
HF capacity would enable the company to foray into high value grades like PVDF
over medium-to-long term.

September 15, 2023 20

 Navin Fluorine International

Story in Charts

Return Ratios to improve to ~20% Revenue to grow 21% CAGR over FY23-FY26E

RoE RoCE Revenue (Rs mn) YoY gr. (RHS)

32.7
35.0 40,000 42.9% 50.0%
30.0 35,000
32.2 40.0%
25.0 30,000
20.6 20.6 28.1%
18.6 18.0 25,000 25.9%
20.0 16.5 30.0%

11,340
15.1

10,220
20,000 18.6% 17.9%
15.0 20.0%
16.4 15.9 16.7 15,000
14.6 15.7 11.0%
10.0 13.5

14,530

20,760

24,626

30,995

36,534
10,000 7.0%
10.0%
5.0 5,000
0.0 - 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY20 FY21 FY22 FY23 FY24EFY25E FY26E

Source: Company, PL Source: Company, PL

EBITDA margins to increase to 27% Exports share (%) increasing with new products

EBITDA (Rs mn) Margin (%) (RHS) Exports Domestic

12,000 27.4 28.0

27.0 27.0
26.5 34 37 37 37
10,000 26.1 27.0 55 47 50
8,000 25.5 26.0
6,000 24.4 25.0 66 63 63 63
45 53 50
4,000 24.0
3,548

5,503

9,868
6,434

8,363
3,108
2,607

2,000 23.0
FY20

FY21

FY22

FY23

FY24E

FY26E
FY25E
- 22.0
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Net D/E stable at 0.2x FY26E P/E at ~35x, seems inexpensive

Net Debt (Rs mn) Net Debt/Equity (RHS) EPS (INR) P/E
10,000 0.5
160 156 180
8,000 0.4 140 129 160
6,000 0.3 120 140
100 92 88
120
4,000 0.2 100
80 62
2,000 0.1 58 55 80
60 40 60
- 0.0 34
40 40
116

137

(2,000) -0.1
36

30

81

76

86
51

53

20 20
(4,000) -0.2 0 0
FY18

FY19

FY20

FY21

FY22

FY23

FY25E

FY26E
FY24E

(6,000) -0.3
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

September 15, 2023 21

 Navin Fluorine International

Navin Fluorine – Pioneer in organic fluorine

Established in 1967, Navin Fluorine International Ltd (NFIL) is a leading flourine

and specialty chemicals manufacturer in India, that produces a wide range of
organic and inorganic fluorochemicals and refrigerated gases. The company makes
more than 40 commercial products used as raw materials in pharmaceuticals,
agrochemicals, insecticides, and cleaners among others. For a large part of its
history, NFIL has been present in these commoditized high volume products and
started diversifying with specialty chemicals (since 2007) catering to
agrochemicals, pharmaceuticals & industrials and CRAMS (in 2011) primarily for
pharmaceuticals. It has R&D operations in India and UK, through Manchester
Organics (MOL).

Business Overview

HPP segment: The HPP (high performance product) segment of NFIL consists of
vintage refrigerants, HFOs and inorganic fluorides.

 Refrigerants: In the refrigerants business, NFIL has only R22 in its portfolio,
which it sells under ‘Mafron’ brand in India and abroad. Company is trying to
expand into non-emissive applications such as feedstock for pharmaceuticals
and agrochemicals segments to compensate for production cut in the emissive
category. It is also expected to launch 5,000mtpa of R32 in the near term.

 Inorganic fluorides: In inorganic fluorides, NFIL caters to domestic steel and

glass segments, oil & gas, abrasives, electronic products, life science and crop
protection.

CDMO: Under CDMO business, it caters to pharmaceuticals which include route

development, process and scale-up from lab scale to ton scale production. NFIL’s
primary focus is on fluorination but gradually also increasing capabilities on other
chemistries to become a one-stop solution for its customers.

Specialty chemicals: NFIL caters largely to agrochemicals, pharmaceuticals and

performance materials as of FY23. Revenue is currently balanced between
domestic and export sales, with domestic sales largely for pharma companies and
export sales for agrochemical companies.

Key Customers

Source: Company, PL

September 15, 2023 22

 Navin Fluorine International

Investment Rationale
CDMO - cGMP4 a key growth driver

 NFIL has taken a balanced approach focusing on both pharma and

agrochemicals, unlike its peers. It built a scalable contract manufacturing
business model catering to pharma innovators, thus creating edge over peers.

 Over the years and also helped by acquisition of Manchester Organics in initial
years, NFIL developed unique pharma innovator relationships catered through
CRAMS segment, thereby CDMO business reported a CAGR of 24% over
FY20-FY23. NFIL is also planning to work with innovators for late-stage entry
in product development once cGMP-4 plant is commercialized.

 It also intends to go beyond just fluorination for pharma’s CDMO. In the same
context, it has signed a contract with Fermion (non-exclusive) for three
patented late stage molecules; commercial supply will start in CY25.
Management has given revenue visibility of USD40m over a 3 years’ contract
period. This will be supplied from the cGMP4 facility, engineering work of which
is on the verge of completion. The facility is expected to be completed by CY24
end.

 The company has a vision of achieving USD100mn revenues from CDMO in

next few years. On a conservative basis, we forecast revenue CAGR of 5%
over FY23-26E.

CDMO at 5% CAGR over FY23-FY26E

6,000 CDMO
5,145
5,000 4,480 4,473
4,057
4,000 3,470
(Rs m n)

2,800
3,000 2,575

2,000 1,780 1,730

1,000

-
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

HPP to offer huge scope of growth and scalability

 Announced in CY20, NFIL entered into a 7-year contract worth USD 410mn
(~Rs 28bn) with Honeywell International Inc. to manufacture hydrofluoroolefins
(HFO) in India for which NFIL invested USD 61.5mn (~Rs 4.4bn). The said
plant commercialized in FY23 and revenue guidance from the same project
was ~Rs 5-5.5bn at peak utilization levels.

 In Q1FY24, NFIL guided ~20% demand cut in CY23 by Honeywell due to poor
demand of refrigerants. CY24 is expected to grow on basis of normalization.

September 15, 2023 23

 Navin Fluorine International

 NFIL is currently completing debottlenecking of HFO plant which would raise

capacity by 25% by CY24-end thereby aiding growth for CY25.

 The company is also in talks with Honeywell for raising contracted quantity,
which may be EPS accretive in FY26 or beyond.

 NFIL has also re-purposed part of its R22 plant to produce ~5,000mtpa of R32
at a capex of Rs800mn which will be adding Rs 2000mn at peak utilization.

 We build in 13% revenue CAGR from HPP segment over FY23-26E.

HPP at 13% CAGR over FY23-FY26E

14,000 HPP 12,926

11,544
12,000
10,016
10,000 8,860
(Rs m n)

8,000

6,000 5,400
4,770 4,680
3,902 4,020
4,000

2,000

-
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

R32 project is based on liquid phase

technology, which the management Specialty chemicals to witness 35% revenue CAGR
believes is cleaner and cheaper
compared to vapor phase standalone  NFIL’s specialty chemicals segment, primarily caters to domestic pharma and
R32 project. global agrochemical (including the innovators) companies. Company works on
both long term contracts supplying to single customers and catalogue based
products supplying to multiple customers.

 The company recently launched four molecules from its MPP plant and is
expected to launch fifth molecule in H2CY24. It is also expected to complete
Rs5.4bn dedicated agrochemical intermediate plant at Dahej by Dec’23.

 Specialty chemicals segment grew at CAGR of 27% during FY18-23 primarily

on the back of volume growth. Although agrochemical demand remains weak,
we build in a revenue CAGR of ~35% over FY23-26E led by new projects in
pipeline.

September 15, 2023 24

 Navin Fluorine International

Segment to grow at 35% CAGR over FY24-FY26E

20,000 Specialty Chemicals 18,464

18,000
16,000 14,978
14,000
12,000 10,554

(Rs m n)
10,000
7,420
8,000
5,660
6,000 4,520
3,810
4,000 3,000
2,258
2,000
-
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

Backward integration & new vertical give growth visibility

 NFIL has a JV with GMDC and GFL for beneficiation of fluorspar into acid grade
HF. The company currently has a capacity of 20,000mtpa of HF and aims to
triple it to 60,000mtpa in next two years at a cost of Rs4.5bn.

 Higher HF capacity would also help in its intended foray into new age
fluoropolymers like PVDF, FKM etc. who find applications in electronics, semi-
conductors, electrical batteries and renewables. This will provide further
visibility for sustainable revenue growth in the long term.

September 15, 2023 25

 Navin Fluorine International

Financial Analysis

Revenue CAGR of 21% over FY23-FY26E

We expect strong revenue growth from new value added business verticals and
overall topline to register ~21% CAGR over FY23-26E to Rs36.5bn. NFIL’s
specialty chemicals business will have greater proportion in the revenue mix (from
30% in FY19 to ~51% in FY26E). Export revenue is also expected to increase on
supply-chain disruptions, due to China’s clamp-down on production as global
operators focus on diversifying their supply chains & product applications while
adding customers and breaking into newer markets.

Revenue CAGR of 21% over FY23-FY26E

Revenue (Rs mn) YoY gr. (RHS)

40,000 50.0%
42.9%
35,000 45.0%
40.0%
30,000
35.0%
28.1%
25,000 25.9% 30.0%
11,340

20,000 25.0%
10,220

18.6% 17.9%
15,000 20.0%
11.0% 15.0%
10,000 7.0%
20,760

30,995
14,530

24,626

36,534
10.0%
5,000 5.0%
- 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

EBITDA CAGR of 21% over FY23-FY26E

We expect EBITDA CAGR of 21% over FY23-FY26E on account of increasing

revenues from value added business such as specialty chemicals business and
CDMO business. EBITDA margins to expand by ~50-100bps over FY23-FY26E,
given improving focus on margin accretive businesses.

EBITDA CAGR of 21% over FY23-FY26E

EBITDA (Rs mn) Margin (%) (RHS)

12,000 27.4 28.0
27.0 27.0 27.5
10,000 26.5 27.0
26.1 26.5
8,000 25.5 26.0
25.5
6,000
24.4 25.0
4,000 24.5
24.0
23.5
3,548

6,434

8,363
5,503

9,868
3,108

2,000
2,607

23.0
- 22.5
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 15, 2023 26

 Navin Fluorine International

PAT CAGR of 22% over FY23-FY26E

We expect 22% PAT CAGR over FY23-26E to Rs6.8bn, aided by robust revenue
growth, healthy operating-profit margins and better leverage.

PAT CAGR of 22% over FY23-FY26E

Adjusted PAT Margin (%) (RHS)

8,000 45.0
39.1
7,000 40.0

6,000 35.0
30.0
5,000
22.1 25.0
4,000 18.1 18.1 18.5 18.6
17.2 20.0
3,000
15.0
2,000 10.0

2,508

2,631

3,752

5,736

6,811
3,998

4,244
1,000 5.0
- 0.0
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

Return ratios to remain stable at 18-20% over FY23-FY26E

We expect return ratios to be stable at 18-20% over FY23-FY26E led by expansion

across segments.

Stable return ratios at ~18-20%

35.0 32.7 RoE RoCE

30.0 32.2

25.0
20.6 20.6
18.6 18.0
20.0 16.5
15.1
15.0
16.4 15.7 15.9 16.7
14.6 13.5
10.0

5.0

0.0
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: PL, Company

September 15, 2023 27

 Navin Fluorine International

Valuations

The proportion of vintage refrigerants (R22/R32) is expected to decline from 28%

in FY18 to 9-10% in FY26. Debottlenecking of HFO capacity by 25% is expected to
be completed by CY24-end, while NFIL is also in negotiation with Honeywell for
doubling of the contract volume.

The dedicated Rs 5.4bn agrochem plant is expected to come up by Dec’23 and

would take another 3-4 years for full ramp up. In Multi-Purpose Plant (MPP), the
company is expected to launch fifth product (agrochem) in 2HCY24.

Over FY23-25E, the company will invest ~Rs 8.3bn in HPP, specialty and CRAMS
business units. The HPP, MPP and agro-chemical projects are all done through
Navin Fluorine Advanced Sciences Limited, a wholly owned subsidiary of the
company, which will lay foundation for next phase of growth

In CDMO (Contract Development and Manufacturing Organization) segment, the

company intends to focus on late entry products. Completion of cGMP4 by CY24-
end would further help it to execute larger projects for pharma innovator companies.
We forecast EPS CAGR of 22% for FY23-26E. The stock is trading at 54x FY24E
EPS of ~Rs 86. Considering strong potential of upcoming projects, we initiate
coverage with ‘Accumulate’ rating and TP of Rs 5064 valuing at 40x Sep’25 EPS.
Delayed project execution, uncertain demand and rise in competition are key risks
to our recommendation.

Valuation Table
Sep’25 EPS (Rs) 127
Target PE (x) 40
Target Price (Rs) 5,064
Source: PL

Key Risks

 Leadership Risk: Current MD, Mr Radhesh Welling, has brought new

momentum and client engagements to the business. We believe his exit could
be detrimental to the performance of the company.

 Loss of customer especially in CRAMS: CRAMS contributes ~20% to

topline as of FY23. Any loss of customer especially in CRAMS business to
detoriate performance of the company.

 Downturn in key user industries: Pharmaceuticals and Agrochemicals

industry contribute around 80% to company’s overall topline. Any delay or
downturn globally in the mentioned industries may impact performance of the
company.

 Sharp surge in RM can hurt margins: Any sharp surge or unavailability of

RM such as fluorspar or to impact business operations & performance of the
company.

September 15, 2023 28

 Navin Fluorine International

Annexure

Key Managerial Personnel

Member Designation
Vishad P. Mafatlal Chairman
Radhesh R. Welling Managing Director
Basant Kumar Bansal Chief Financial Officer
Mohan M. Nambiar Non-Independent Non-Executive Director
Pradip N. Kapadia Independent Non-Executive Director
Sunil S. Lalbhai Independent Non-Executive Director
Sharad M. Kulkarni* Independent Non-Executive Director
Sudhir G. Mankad Independent Non-Executive Director
Harish H. Engineer Independent Non-Executive Director
Atul K. Srivastava Independent Non-Executive Director
Radhika V. Haribhakti Independent Non- Executive Director
Ashok U. Sinha Independent Non- Executive Director
Sujal A. Shah^ Independent Non- Executive Director
Apurva S. Purohit# Independent Non- Executive Director
Source: Company, PL

September 15, 2023 29

 Navin Fluorine International

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY23 FY24E FY25E FY26E Y/e Mar FY23 FY24E FY25E FY26E

Net Revenues 20,774 24,626 30,995 36,534 Non-Current Assets

YoY gr. (%) 42.9 18.5 25.9 17.9
Cost of Goods Sold 8,960 10,392 13,080 15,417 Gross Block 17,283 21,283 25,283 29,283
Gross Profit 11,814 14,234 17,915 21,117 Tangibles 17,283 21,283 25,283 29,283
Margin (%) 56.9 57.8 57.8 57.8 Intangibles - - - -
Employee Cost 2,494 3,367 3,973 4,672
Other Expenses 3,817 4,433 5,579 6,576 Acc: Dep / Amortization 2,565 3,375 4,213 5,195
Tangibles 2,565 3,375 4,213 5,195
EBITDA 5,503 6,434 8,363 9,868 Intangibles - - - -
YoY gr. (%) 55.1 16.9 30.0 18.0
Margin (%) 26.5 26.1 27.0 27.0 Net fixed assets 14,718 17,908 21,070 24,088
Tangibles 14,718 17,908 21,070 24,088
Depreciation and Amortization 626 810 838 982 Intangibles - - - -

EBIT 4,877 5,624 7,525 8,886 Capital Work In Progress 2,786 2,786 2,786 2,786
Margin (%) 23.5 22.8 24.3 24.3 Goodwill - - - -
Non-Current Investments 438 438 438 438
Net Interest 275 281 273 272 Net Deferred tax assets (348) (348) (348) (348)
Other Income 357 315 397 468 Other Non-Current Assets - - - -

Profit Before Tax 4,959 5,659 7,649 9,081 Current Assets

Margin (%) 23.9 23.0 24.7 24.9 Investments - - - -
Inventories 4,681 5,582 6,821 8,036
Total Tax 1,207 1,415 1,912 2,270 Trade receivables 5,615 6,679 8,407 9,909
Effective tax rate (%) 24.3 25.0 25.0 25.0 Cash & Bank Balance 348 485 130 649
Other Current Assets 6,706 6,706 6,706 6,706
Profit after tax 3,752 4,244 5,736 6,811 Total Assets 35,293 40,586 46,358 52,612
Minority interest - - - -
Share Profit from Associate - - - - Equity
Equity Share Capital 99 99 99 99
Adjusted PAT 3,752 4,244 5,736 6,811 Other Equity 21,750 25,323 30,152 35,885
YoY gr. (%) 42.6 13.1 35.2 18.7 Total Networth 21,850 25,422 30,251 35,984
Margin (%) 18.1 17.2 18.5 18.6
Extra Ord. Income / (Exp) - - - - Non-Current Liabilities
Long Term borrowings 8,487 9,335 8,868 8,159
Reported PAT 3,752 4,244 5,736 6,811 Provisions - - - -
YoY gr. (%) 42.6 13.1 35.2 18.7 Other non current liabilities - - - -
Margin (%) 18.1 17.2 18.5 18.6
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt - - - -
Total Comprehensive Income 3,752 4,244 5,736 6,811 Trade payables 406 498 620 731
Equity Shares O/s (m) 50 50 50 50 Other current liabilities 4,203 4,983 6,271 7,392
EPS (Rs) 75.7 85.7 115.8 137.5 Total Equity & Liabilities 35,293 40,586 46,358 52,612
Source: Company Data, PL Research Source: Company Data, PL Research

September 15, 2023 30

 Navin Fluorine International
Cash Flow (Rs m) Key Financial Metrics
Y/e Mar FY23 FY24E FY25E FY26E Year
Y/e Mar FY23 FY24E FY25E FY26E

PBT 4,959 5,659 7,649 9,081 Per Share(Rs)

Add. Depreciation 626 810 838 982 EPS 75.7 85.7 115.8 137.5
Add. Interest 275 281 273 272 CEPS 88.4 102.0 132.7 157.3
Less Financial Other Income 357 315 397 468 BVPS 441.0 513.1 610.5 726.2
Add. Other (91) - - - FCF (165.3) 4.9 26.1 52.0
Op. profit before WC changes 5,769 6,749 8,760 10,336 DPS 12.0 13.6 18.3 21.8
Net Changes-WC (5,307) (1,094) (1,556) (1,487) Return Ratio(%)
Direct tax (1,098) (1,415) (1,912) (2,270) RoCE 19.6 17.3 20.4 21.3
Net cash from Op. activities (636) 4,241 5,292 6,579 ROIC 15.2 13.1 15.4 16.2
Capital expenditures (7,555) (4,000) (4,000) (4,000) RoE 18.6 18.0 20.6 20.6
Interest / Dividend Income 30 - - - Balance Sheet
Others 969 - - - Net Debt : Equity (x) 0.4 0.3 0.3 0.2
Net Cash from Invt. activities (6,556) (4,000) (4,000) (4,000) Net Working Capital (Days) 174 174 172 172
Issue of share cap. / premium - - - - Valuation(x)
Debt changes 7,442 849 (467) (709) PER 60.0 53.0 39.2 33.1
Dividend paid (543) (672) (908) (1,078) P/B 10.3 8.9 7.4 6.3
Interest paid (275) (281) (273) (272) P/CEPS 51.4 44.5 34.2 28.9
Others (45) - - - EV/EBITDA 42.4 36.4 28.0 23.6
Net cash from Fin. activities 6,579 (104) (1,648) (2,060) EV/Sales 11.2 9.5 7.5 6.4
Net change in cash (613) 137 (356) 519 Dividend Yield (%) 0.3 0.3 0.4 0.5
Free Cash Flow (8,191) 241 1,292 2,579 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q2FY23 Q3FY23 Q4FY23 Q1FY24
Net Revenue 4,192 5,636 6,971 4,912
YoY gr. (%) 23.7 48.7 70.5 23.6
Raw Material Expenses 1,836 2,464 2,837 2,027
Gross Profit 2,356 3,172 4,134 2,885
Margin (%) 56.2 56.3 59.3 58.7
EBITDA 938 1,556 2,018 1,142
YoY gr. (%) 11.5 57.8 114.1 15.2
Margin (%) 22.4 27.6 28.9 23.3
Depreciation / Depletion 177 250 76 213
EBIT 762 1,306 1,942 929
Margin (%) 18.2 23.2 27.9 18.9
Net Interest 40 92 140 194
Other Income 109 99 40 83
Profit before Tax 831 1,313 1,842 818
Margin (%) 19.8 23.3 26.4 16.6
Total Tax 252 247 478 202
Effective tax rate (%) 30.4 18.8 26.0 24.8
Profit after Tax 578 1,066 1,364 615
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 578 1,066 1,364 615
YoY gr. (%) (8.6) 54.9 81.4 (17.4)
Margin (%) 13.8 18.9 19.6 12.5
Extra Ord. Income / (Exp) - - - -
Reported PAT 578 1,066 1,364 615
YoY gr. (%) (8.6) 54.9 81.4 (17.4)
Margin (%) 13.8 18.9 19.6 12.5
Other Comprehensive Income - - - -
Total Comprehensive Income 578 1,066 1,364 -
Avg. Shares O/s (m) 50 50 50 50
EPS (Rs) 11.6 21.3 27.3 12.3
Source: Company Data, PL Research

September 15, 2023 31

 Gujarat Fluorochemicals
(FLUOROCH IN)
Rating: ACCUMULATE | CMP: Rs3,125 | TP: Rs3,230

September 15, 2023 Fluoropolymers to drive growth

Company Report We initiate coverage on Gujarat Fluorochemicals Ltd (GFL) with ‘Accumulate’
rating and TP of Rs 3230 valuing at 25x Sep’25 EPS of Rs129. GFL is a play
on growth opportunities in fluorochemicals & fluoropolymers given 1) its
market leadership in fluoropolymers amidst high technological entry barrier
2) capacity expansion (total fluoropolymers capacity from ~25,000mtpa to
Key Financials - Consolidated ~40,000mtpa inclusive of PTFE- Polytetrafluoro ethylene & new age
Y/e Mar FY23 FY24E FY25E FY26E
fluoropolymers) coupled with ever increasing usage of fluoropolymers (36%)
Sales (Rs. m) 56,847 50,171 69,942 76,298
EBITDA (Rs. m) 19,653 14,865 22,771 24,882 in high value applications like semiconductor industry and renewables, 3)
Margin (%) 34.6 29.6 32.6 32.6 foray in newer fluoropolymers such as PVDF (Polyvinylidene fluoride), PFA
PAT (Rs. m) 12,470 8,582 13,702 14,685
EPS (Rs.) 113.5 78.1 124.7 133.7
(per fluoro alkaoxyl alkanes) and FKM (fluoro elastomers) fetching ~20%
Gr. (%) 58.4 (31.2) 59.7 7.2 higher realization than PTFE and 4) addition of refrigerants like R142b and
DPS (Rs.) 3.4 3.1 6.2 6.7
R225 with a view to launch HFOs (hydrofluoro olefins) post patent expiry. We
Yield (%) 0.1 0.1 0.2 0.2
RoE (%) 25.5 14.5 19.6 17.6 expect Revenue/PAT CAGR of 10%/8% and EBITDA margins of ~32% over
RoCE (%) 27.0 16.0 21.9 19.8 FY23-26E given increasing share of new age fluoropolymers and higher PTFE
EV/Sales (x) 6.3 7.1 5.1 4.6
EV/EBITDA (x) 18.1 23.9 15.6 14.1
grades. The stock is currently trading at ~30x TTM P/E and at inexpensive
PE (x) 27.5 40.0 25.1 23.4 valuations. Initiate with ‘Accumulate’.
P/BV (x) 6.2 5.4 4.5 3.8

New age fluoropolymers, the key driver for growth: Over the years, GFL’s
largest revenue contributors have been bulk chemicals and fluorochemicals.
However, lately, focus has shifted to fluoropolymers such as PTFE, PVDF, FKM,
PFA among others. The company has ~10-15% market share globally in PTFE and
Key Data GFLL.BO | FLUOROCH IN
remains well placed on account of low Chinese competition for its grades, high
52-W High / Low Rs.4,174 / Rs.2,534
Sensex / Nifty 67,839 / 20,192 technology barrier and close customer engagement. GFL is working on adding not
Market Cap Rs.343bn/ $ 4,127m
only more grades in this space but also new age products such as PVDF, FKM,
Shares Outstanding 110m
3M Avg. Daily Value Rs.465m PFA to cater to increasing demand of EVs and solar panels. As per our estimates,
new fluoropolymers revenues grew 90% YoY in FY23. We expect 20% CAGR in
fluoropolymers segment over FY23-FY26E with increased usage in EV, Li-ion
battery and solar panels among others.

Shareholding Pattern (%)

Fluorochemicals story intact: Company manufactures fluorochemicals such as
Promoter’s 63.80
Foreign 6.44 R22, R142b, R404, R410a etc. and fluorospecialty. Over the years, R22 emerged
Domestic Institution 5.86 as the company’s largest product (with capacity of 65,000mtpa). However, it re-
Public & Others 23.88
Promoter Pledge (Rs bn) - initiated investments in the ref-gas space and restarted supplies of R125 (in FY23)
to cater to higher export demand (led by imposition of ADD by US on Chinese ref
gas imports). We believe fluorochemicals revenue will be driven by expansion of
R142b capacity and higher volumes in R22 in near term. We build in 6% de-growth
over FY23-26E on account of softness in demand and normalization of prices.
Stock Performance (%)
1M 6M 12M
Absolute 9.1 (1.9) (13.5)
Vertical integration across value chain – backbone of company: GFL has a
Relative 5.2 (16.7) (23.5) strong backward integration model with manufacturing of caustic soda-chlorine to
chloromethane. The company also manufactures RMs such as R22, TFE while it
Swarnendu Bhushan also has access to fluorspar through its JV with GMDC & NFIL, which takes care of
[email protected] | 91-22-66322260 RM requirement. With backward integration in place coupled with higher
realisations, gross margins improved from 65% to 72% during FY20-FY23.
However, given competitive intensity, gross margins may remain under pressure
and drop to ~70% over FY24-FY26E.

September 15, 2023 32

 Gujarat Fluorochemicals

Story in Charts

Working capital days to stay at 113 days Despite focus on new verticals, Net D/E at 0.2x

Debtor days Payables days Inventory days N/E Net Debt (Rs mn) (RHS)

140 119 0.5 16,335 18,000

114 14,952
120 13,810 13,171 16,000
92 95 0.4 12,404 14,000
100 87 88 88 88 11,384
79 12,000
72 71 70 70 70 0.3
80 10,000
6,539 8,000
60 0.2
59 6,000
40 51 47 44 45 45 45 0.1 4,000
20

0.4

0.4

0.3

0.2

0.2

0.2

0.1
2,000
- 0.0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Revenue to grow 10% CAGR led by EBITDA margins to bottom out at 32-33%
fluoropolymer
EBITDA (Rs mn) EBITDA Margins (RHS)
Revenue (Rs mn) YoY gr. (RHS) 30,000 40.0%
34.6%
32.6% 32.6%
90,000 60% 25,000 30.3% 29.6% 35.0%
49%
80,000 44%
50% 24.1%
30.0%
39% 20,000
70,000 40% 25.0%
18.1%
60,000 30% 15,000 20.0%
6,376

50,000 15.0%
20%
4,716

9% 10,000
50,171

40,000 10.0%
11,976

22,771

24,882
19,653

14,865
30,000
2% 10%
-5% 5,000 5.0%
0%
39,536

56,847

69,942

76,298
26,064

26,505

20,000 -12%
-10% 0 0.0%
10,000
FY20 FY21 FY22 FY23 FY24E FY25E FY26E
0 -20%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Source: Company, PL
Source: Company, PL

Adj PAT to grow at 6% CAGR over FY23-FY26E Return ratios at 17-20%

Adj PAT (Rs mn) PAT Margins (RHS) ROCE ROE

16,000 25% 30.0% 25.5%

22%
20% 20%
14,000 19% 25.0%
17% 20% 20.3% 27.0% 19.6%
12,000 17.6%
14% 20.0%
10,000 15% 14.5% 21.9%
19.8%
15.0%
8,000
9% 10.1% 18.2% 16.0%
6,000 10%
10.0% 6.2%
2,224

4,000
12,470

13,702

14,685
7,872

8,582

5% 5.0% 8.3%
3,643

2,000 5.6%
0 0% 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

September 15, 2023 33

 Gujarat Fluorochemicals

GFL - Leading fluoropolymers producer

Incorporated in 1989, Gujarat Fluorochemicals Ltd (GFL) started manufacturing

refrigerant gases such as R11, R12, R22 etc. at its facility in Ranjit Nagar, Gujarat.
Over the years, company diversified its product basket and developed high value
fluoropolymers along with fluorospecialty chemicals. Going ahead, GFL is
developing new grades of fluoropolymers and also venturing in new age
fluoropolymers which is expected to be big revenue driver for the company.

Company derives ~50% of its revenue Geographic Mix (FY23)

from exports to countries such as USA
& Europe as of FY23. ROW
12%

India
40%

USA
26%

Europe
21%

Source: Company, PL

Business Overview

GFL’s businesses are largely divided in 3 parts:

 Bulk chemicals: This comprises of caustic soda, chlorine, chloromethanes

contributing ~20% to overall topline as of FY23. The segment has done well
over FY20-FY23 (growing at CAGR of 17%) on account of pricing benefits in
the chlor-alkali value chain.

 Fluorochemicals: Currently contributes ~25-27% to overall topline. In this

segment, company manufactures refrigerant gases such as R-22, R410a,
R407c & blends and other fluorospecialty chemicals.

 Fluoropolymers: GFL manufactures PTFE and New Age Fluoropolymers

both contributing ~50-52% to overall topline, of which PTFE is larger part
contributing >30% to topline. The segment is in great demand led by usage
industries such as EV, solar panels, lithium ion battery, hydrogen fuel etc.

September 15, 2023 34

 Gujarat Fluorochemicals

Product Profile

Bulk Chemicals Peers & Applications

Product Applications Global Peers Domestic Peers
Textiles Arkema, Covestro
AG, Formosa Grasim, DCM
Caustic Soda Soaps & Detergents Plastics Corporation, Shriram, Meghmani
& Alumina Olin Corporation, , Finechem Ltd
The Dow Chemical
Pharma API, Foam Azko Nobel Industrial
manufacturing, Agri Chemicals , KH
Methylene Dichloride
chem and Pharma, Chemicals , Iris
Formulations Biotech GmBH,
BASF SE, Dow
Feedstock for R22, Chemicals ,
Chloroform solvent for pharma, Tokuyama GACL
cleaning agent
Corporation, Solvay
Dow Chemical ,
Meghmani Finechem,
Pesticides, Agri INEOS Group, Shin-
Carbon Tetra Gujarat
chemicals, Plastics, Etsu,
Chloride
Resins Shanghai Chlor-Alkal Alkalies & Chemical
i , Solvay Ltd

Source: Company, PL

Fluorochemicals Peers & Applications

Product Applications Global Peers Domestic Peers
Residential AC Arkema, Chemours ,
R22 feeds tock for Linde Gas , Honeywel l , NFL, SRF
fluoropolymers Daikin, Du Pont
3F, Ying Peng Chemical
R125 Residential AC , Yuean Chemical , NFL, SRF
Limin Chemical
Dongyue Group,
R410a Residential AC Arkema, SRF
Chemours , Daikin

Source: Company, PL

Fluoropolymers Peers & Application

Product Applications Global Peers Domestic Peers
PTFE
PFA
water treatment
PVDF membranes, O&G, 3M, Solvay,
SRF, NFIL
FKM automotive, EV Dongyue, Chemours
batteries, cookware
FEP

Source: Company, PL

Manufacturing Facilities
Plant Location Setup in Description
Manufactures R22, AHF. MPP for
Ranjitnagar Gujarat, India 1989
fluorospecialt also present
Manufactures PTFE resin, value added
Dahej Gujarat, India 2007 fluoropolymers such as
PFA,FEP,PVDF,FKM. Other plants
Phased commisioned of new projects under
Jolva Gujarat, India 2022
fluoropolymers & new age chemicals
Taurit Morocco 2017 Mining florspar
Rockdale Texas, USA 2007 Produces PTFE Blends

Source: Company, PL

September 15, 2023 35

 Gujarat Fluorochemicals

Investment Rationale
Entry into new age fluoropolymers to propel top-line

High entry barriers & rising PTFE demand to sustain volume growth

 Production of PTFE is challenging as the rigid polymer chains crystallize easily

and have high melt viscosity compared to other polymers, thereby requiring
specialized processing equipment.

 Company started manufacturing PTFE (Polytetra Fluoroethylene) since 2007,

in order to diversify its products basket and insulate itself from sluggish
performance of refrigerants. Currently PTFE alone contributes ~ 35-40% to
overall topline as of FY23.

 As of CY22, global demand for PTFE stands at ~175,000mtpa, growing at 5%

rate every year, as per management. Currently, company’s installed capacity
for PTFE stands at 18,000mtpa and it plans to debottleneck it to 21,000mtpa
by Q1FY25.

 As per management, commodity grade PTFE are dominated by Chinese

manufacturers, while premium grade is manufactured mainly by Western
manufacturers.

 Company manufactures almost ~85% of premium grades of PTFE. Premium

grades command ~20-40% higher realization.

 Also, the company manufactures PTFE largely using non-fluorinated

surfactants, which would provide edge over competitors. Going ahead,
management guided that it will manufacture new age fluoropolymer products
such as PVDF, PFA, FKM using non-fluorinated technology thus insulating
against concerns on usage of fluorinated surfactants.

 We expect 20% CAGR in fluoropolymers segment over FY23-26E primarily

driven by debottlenecking of PTFE capacity and launch of new fluoropolymers.

PTFE can be manufactured from

PFAS route, however the same is PTFE prices expected to remain under pressure
under regulatory ban globally. Wrt
use of PFAS technology, global  R22 is a key raw material used in manufacturing PTFE and other
manufacturer such as Chemours & fluoropolymers such as PFA, FKM, FEP etc. With increasing demand for PTFE,
3M had been impacted and exited the other fluoropolymers, new age verticals etc. R22 remains in short supply
business in FY23.
driving prices at new highs. However, we believe global manufacturers such
as Dongyue and Solvay will benefit as they are backwardly integrated with RM
manufacturing capacities and capabilities.

 Due to higher demand from automotive applications, PTFE prices rose from
Rs/kg 500 to Rs/kg 960 over last few years, however, we believe with
increasing competition (SRFs upcoming PTFE plant, capacity expansion by
global players such as Dongyue), PTFE prices are expected to remain under
pressure. However, our 20% CAGR in fluoropolymers is mainly due to volume
growth.

September 15, 2023 36

 Gujarat Fluorochemicals

New age fluoropolymers – Key growth driver

 PVDF, FKM, PFA - the new age fluoropolymers have been the key focus of the
company. The company is working on adding more variants in this space,
specially to cater to increasing EV demand globally. Also company stands
backward integrated for manufacturing new age fluoropolymers providing edge
over Indian peers.

New fluoropolymers realisations are at  New fluoropolymers reported +90% revenue CAGR during FY20-FY23, driven
>25% premium to Fluoropolymer such
by increased realizations for PVDF, FKM etc.
as PTFE, thus also margin accretive.

 We expect ~30% CAGR for the segment over FY23-FY26E with increased
usage in EV space, lithium ion battery etc.

Fluoropolymers share increasing to ~52-55%

Bulk Chemicals Fluorochemicals Fluoropolymers Others

8% 5% 4% 2%

43% 48% 52%

55%

23% 25% 15% 27%

26% 23% 25% 19%

FY20 FY21 FY22 FY23

Source: Company, PL

Fluorochemicals story intact

 GFL has primarily been the largest producer of R22 (with capacity of
65,000mtpa) in India. However, it re-initiated investments in the ref-gas space
and restarted supplies of R125 (~5,000mtpa capacity) to cater to higher export
demand (led by imposition of anti-dumping duty by US on Chinese ref gas
imports).

 The company achieved over 100% YoY growth in fluorochemicals segment on

account of higher realisations of R-125, R142b in FY23.

 Management indicated that it intends to pursue production of HFOs (4th

generation gases) post patent expiry and thus has been producing R225 – a
key intermediate in one of the two processes utilized for manufacturing HFOs.

 However, we expect normalization in realizations going forward. As a result,

we forecast de-growth of 6% in fluorochemicals over FY23-26E.

September 15, 2023 37

 Gujarat Fluorochemicals

Vertical integration across value chains- a key strength

 The company has JV with GMDC and NFIL for fluorspar sourcing and it is
expanding its AHF capacity which will help supply key RMs for fluoropolymer,
ref-gas and battery chemicals.

 GFL expects to increase capacity of R-142b, (a key feedstock for PVDF/FKM)

to 25,000mtpa providing feedstock security for PVDF manufacturing.

 With all these key RMs like fluorspar, AHF, TFE, R142b in abundant
availability, we believe GFL has edge over competitors in terms of maintaining
a stable margin profile.

Value Chain Diagram

Source: Company, PL

September 15, 2023 38

 Gujarat Fluorochemicals

Focus on New Age applications

GFL is aggressively investing into new-age industries such as lithium ion batteries
for EVs, solar panels and hydrogen fuel cells/PEM technology. These products
require long gestation period and customer approvals along with stringent
compliance norms.

Electric vehicle batteries:

 GFL is in the process of setting up an integrated battery chemicals complex

and has developed suitable PVDF grades for cathode binder application.

 As per McKinsey analysis, dated October 2019, Battery demand (by 2030) for
EVs energy storage and consumer electronics is estimated at 2,633 GWH with
EV battery chain providing revenue opportunities of USD300bn by CY30.

 Globally, a lot of manufacturers are planning to set up EV battery

manufacturing plants in India over next few years to meet the Government
push to make India a significant global manufacturer of EV vehicles.

 To grab the opportunity size in EV battery space, GFL has planned capex of
Rs 2.5bn for initial capacity (to manufacture electrolyte salt and formulations)
and expects to generate asset turns of ~1.8-2x over FY25-FY26E.

Lithium Ion Battery & electrolyte salts:

Lithium Ion Battery is becoming increasingly popular due to its numerous

advantages compared to conventional battery systems. The lithium-ion battery
market in India is anticipated to be driven by factors, such as electric vehicles and
energy storage systems (ESS) for both commercial and residential applications.

 The global Lithium-ion battery market was USD44.5bn in CY21 and is

projected to reach USD193bn by CY28, exhibiting a CAGR of 23.3%, as per
globe newswire.

 Global manufacturers include BYD Company, LG Chem, Samsung SDI,

Panasonic Corporation, Hitachi etc.

 According to Mordor intelligence, India’s lithium-ion battery market was valued

at USD1.7bn in CY20 and is expected to reach USD4.85bn by CY27,
registering a CAGR of 17.2%.

Components of Lithium Ion Battery

Source: Company, PL

September 15, 2023 39

 Gujarat Fluorochemicals

 LiPF6 (Lithium hexafluorophosphate) is widely utilized in devising of lithium ion

batteries. Increasing demand for lithium ion batteries from sectors such as
consumer electronics, automotive and others is increasing demand for LiPF6.

 Growth within sales of electric vehicles will increase demand for lithium ion
batteries. In a Li-ion battery electrolyte, LiPF6 offers high energy densities and
considerable power densities.

 The global LiPF6 market size is estimated to be worth USD3.1bn in CY22 and
expected to reach to USD5.5bn by CY28 growing at CAGR of 9.7%, according
to GII Research.

 The global major manufacturers of LiPF6 include DuoFuDuo, Tinci Materials

Technology, Xintai Material Technology, Morita New Energy Materials, Jiangsu
Jiujiujiu Technology, Shandong Shida Shenghua Chemical, Hubei Hongyuan,
Yongtai Technology, and Stella Chemifa, etc. In terms of revenue, the global
three largest players hold a 55% market share of LiPF6 in CY21.

LiPF6 Global Market Size

2,50,000
Demand (Tons)
2,10,000
2,00,000
1,60,000
1,50,000
1,20,000

1,00,000 80,000
60,000
50,000 30,000 33,000
25,000

-
CY18 CY19 CY20 CY21 CY22 CY23E CY24E CY25E

Source: Kanto Denka Presentation, PL

Solar panels:

 Solar panels are the heart of solar power plants and these contain back sheet
based on PVDF film.

 GFL plans to set-up India’s first PVDF solar film project to be commissioned in
FY24. With its own integrated PVDF manufacturing facilities, the plant will be
ideally suited to cater both domestic and international markets. Intended capex
for the same stands at Rs 1bn with asset turns of 1.5x. Demand of solar panels
would be driven by government’s ambitious target of achieving 450GW of
renewable energy by 2030.

September 15, 2023 40

 Gujarat Fluorochemicals

Solar Panels (Structure)

Source: Company, PL

Bulk Chemicals: Slow growth, no capex plans in near term

GFL manufactures bulk commodities such as caustic soda and chloromethane, all
low margin products. As of FY23, bulk chemicals grew 10% YoY, contributing 20%
to the topline. The company has fully integrated operations for its ref-gas and
fluoropolymer business and in the process, these products are produced as co-
products. Management guided no capacity expansion plans in these segment and
expects flat growth in FY24/FY25E.

September 15, 2023 41

 Gujarat Fluorochemicals

Financial Analysis
Revenue CAGR of 10% over FY23-FY26E led by volumes

GFL reported revenue CAGR of 30% during FY20-23, due to sharp increase in
realisations across fluorochemicals & PTFE business led by demand–supply
mismatch. Due to downturn in pricing and capex delays (on account of poor global
agrochem demand), the company reported de-growth YoY & QoQ in Q1FY24. We
expect revenue CAGR of 10% over FY23-FY26E, mainly driven by volume growth
across segments (with capacity expansions in place).

Revenue CAGR of 10% over FY23-26E

Revenue (Rs mn) YoY gr. (RHS)

90,000 60%
49%
80,000 44% 50%
39%
70,000 40%
60,000
30%
50,000
20%

50,171
40,000 9%
2% 10%
30,000
-5%
20,000 0%

69,942

76,298
26,064

26,505

39,536

56,847
-12%
10,000 -10%
0 -20%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

EBITDA CAGR of 8% over FY23-FY26E

GFL reported EBITDA CAGR of 60% during FY20-FY23, primarily led by pricing
growth. However, with increase in competition across global and domestic peers,
we expect EBITDA CAGR of 8% over FY23-26E with EBITDA margins at ~32-33%.

EBITDA CAGR of 8% over FY23-FY26E

EBITDA (Rs mn) EBITDA Margins (RHS)

30,000 40.0%
34.6%
32.6% 32.6%
30.3% 35.0%
25,000 29.6%
30.0%
20,000 24.1%
25.0%
18.1%
15,000 20.0%
15.0%
6,376

10,000
4,716

10.0%
11,976

19,653

14,865

22,771

24,882

5,000
5.0%
0 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 15, 2023 42

 Gujarat Fluorochemicals

PAT CAGR of 6% over FY24-FY26E

The bottom-line of the company grew >70% CAGR during FY20-FY23. However,
we expect PAT CAGR of ~6-7% and PAT margins of 19-20% over FY23-FY26E.

PAT CAGR of 6% over FY24-FY26E

Adj PAT (Rs mn) PAT Margins (RHS)

16,000 22%
25%
14,000 20% 20% 19%
17% 20%
12,000
10,000 14%
15%
8,000
9%
6,000 10%

4,000
2,224
5%

12,470

13,702

14,685
8,582
7,872
3,643
2,000
0 0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 15, 2023 43

 Gujarat Fluorochemicals

Valuation

With increasing usage of fluorine in agrochemicals, pharmaceuticals and life

science materials, fluorine chemistry is in a sweet spot globally. GFL’s strategic
focus on new fluoropolymers such as PVDF, PTFE, FKM, PFA and battery
chemicals makes it a unique and compelling proxy play on multiple new-age
technologies such as EVs, solar energy, 5G etc with huge growth potential.

Further, fluoropolymers are extensively used in battery for separators, wirings and
battery casing due to superior performance. Similarly, PVDF sheets are used in
solar panels and find use in 5G equipment too. We believe these segments are
likely to drive growth of the company, going ahead.

We estimate healthy revenue growth across segments such as fluoropolymers and

new age verticals on account of 1) capacity expansions, 2) healthy business
scenario and 3) increasing product basket.

We expect EBITDA/PAT CAGR of 8%/6% over FY23-FY26E (with reasonable

probability of upsides) with ~18-20% RoCE. Initiate coverage on Gujarat
Fluorochemicals Ltd with a ‘ACCUMULATE’ rating and target price of Rs 3,230
valuing the stock at 25x Sep’25 EPS of Rs 129 (P/E multiple).

Valuation Table
Sep 25 EPS (Rs) 129
Target PE (x) 25
TP (Rs) 3,230
Source: PL

Key Risks

 Delay in capacity expansion: Company has guided for significant capacity

expansion across business segments such as new age polymers, PTFE,
fluorochemicals like R32 & HFO going ahead. Any slowdown in execution of
the mentioned capex to impact negatively.

 Regulatory tailwind: Any regulatory ban such as use of environmental

unfriendly PFAS/PFOA could erode the company financials.

 Higher competitive intensity: Increasing competitive intensity especially in

fluoropolymers space to impact realizations in fluoropolymers and refrigerants
business.

 Capacity addition in China: Chinese manufacturers have been adding

capacities to cater to growing demand. Any large capacity addition in China
can have a negative impact on company’s profit margins.

September 15, 2023 44

 Gujarat Fluorochemicals

Annexure

Key Managerial Personnel

KMP Designation/Role
Mr Vivek Kumar Jain Managing Director
Mr Manoj Agrawal Chief Financial Officer
Mr Bhavin Desai Company Secretary

Source: Company, PL

September 15, 2023 45

 Gujarat Fluorochemicals

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY23 FY24E FY25E FY26E Y/e Mar FY23 FY24E FY25E FY26E

Net Revenues 56,847 50,171 69,942 76,298 Non-Current Assets

YoY gr. (%) 43.8 (11.7) 39.4 9.1
Cost of Goods Sold 15,705 15,206 20,403 22,257 Gross Block 45,361 57,861 67,861 77,861
Gross Profit 41,141 34,965 49,539 54,041 Tangibles 43,099 55,599 65,599 75,599
Margin (%) 72.4 69.7 70.8 70.8 Intangibles 2,262 2,262 2,262 2,262
Employee Cost 3,221 3,543 3,827 4,133
Other Expenses 18,267 16,556 22,941 25,026 Acc: Dep / Amortization 14,095 17,192 21,026 25,471
Tangibles 13,438 16,535 20,369 24,814
EBITDA 19,653 14,865 22,771 24,882 Intangibles 657 657 657 657
YoY gr. (%) 64.1 (24.4) 53.2 9.3
Margin (%) 34.6 29.6 32.6 32.6 Net fixed assets 31,266 40,669 46,835 52,390
Tangibles 29,661 39,065 45,230 50,785
Depreciation and Amortization 2,361 3,097 3,835 4,445 Intangibles 1,605 1,605 1,605 1,605

EBIT 17,293 11,769 18,937 20,438 Capital Work In Progress 11,424 11,424 11,424 11,424
Margin (%) 30.4 23.5 27.1 26.8 Goodwill - - - -
Non-Current Investments 6,043 6,043 6,043 6,043
Net Interest 1,168 989 1,142 1,396 Net Deferred tax assets (2,410) (2,410) (2,410) (2,410)
Other Income 904 995 1,005 1,105 Other Non-Current Assets - - - -

Profit Before Tax 17,029 11,774 18,799 20,147 Current Assets

Margin (%) 30.0 23.5 26.9 26.4 Investments 2 2 2 2
Inventories 14,854 12,096 16,863 18,395
Total Tax 4,617 3,192 5,097 5,462 Trade receivables 11,068 9,622 13,414 14,633
Effective tax rate (%) 27.1 27.1 27.1 27.1 Cash & Bank Balance 1,610 2,096 6,749 14,189
Other Current Assets - - - -
Profit after tax 12,412 8,582 13,702 14,685 Total Assets 83,714 89,514 1,11,870 1,28,575
Minority interest (58) - - -
Share Profit from Associate 0 0 0 0 Equity
Equity Share Capital 110 110 110 110
Adjusted PAT 12,470 8,582 13,702 14,685 Other Equity 55,097 63,337 76,356 90,308
YoY gr. (%) 58.4 (31.2) 59.7 7.2 Total Networth 55,207 63,447 76,466 90,417
Margin (%) 21.9 17.1 19.6 19.2
Extra Ord. Income / (Exp) - - - - Non-Current Liabilities
Long Term borrowings 1,832 1,832 1,832 1,832
Reported PAT 12,470 8,582 13,702 14,685 Provisions 395 395 395 395
YoY gr. (%) 58.4 (31.2) 59.7 7.2 Other non current liabilities 477 477 477 477
Margin (%) 21.9 17.1 19.6 19.2
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt 12,950 11,649 17,323 18,897
Total Comprehensive Income 12,470 8,582 13,702 14,685 Trade payables 6,910 6,185 8,623 9,407
Equity Shares O/s (m) 110 110 110 110 Other current liabilities 3,529 3,114 4,342 4,736
Adj EPS (Rs) 113.5 78.1 124.7 133.7 Total Equity & Liabilities 83,714 89,514 1,11,870 1,28,575
Source: Company Data, PL Research Source: Company Data, PL Research

September 15, 2023 46

 Gujarat Fluorochemicals
Cash Flow (Rs m) Key Financial Metrics
Y/e Mar FY23 FY24E FY25E FY26E Year
Y/e Mar FY23 FY24E FY25E FY26E

PBT 17,847 11,774 18,799 20,147 Per Share(Rs)

Add. Depreciation 2,361 3,097 3,835 4,445 Adj EPS 113.5 78.1 124.7 133.7
Add. Interest 1,168 989 1,142 1,396 CEPS 135.0 106.3 159.6 174.1
Less Financial Other Income 904 995 1,005 1,105 BVPS 502.6 577.6 696.1 823.1
Add. Other (461) (995) (1,005) (1,105) FCF 5.8 19.3 (1.8) 62.7
Op. profit before WC changes 20,915 14,865 22,771 24,882 DPS 3.4 3.1 6.2 6.7
Net Changes-WC (8,827) 3,063 (8,208) (2,639) Return Ratio(%)
Direct tax (4,700) (3,305) (4,762) (5,355) RoCE 27.0 16.0 21.9 19.8
Net cash from Op. activities 7,389 14,623 9,801 16,889 ROIC 20.2 12.0 16.9 16.0
Capital expenditures (6,700) (12,500) (10,000) (10,000) RoE 25.5 14.5 19.6 17.6
Interest / Dividend Income 351 995 1,005 1,105 Balance Sheet
Others 1,586 - - - Net Debt : Equity (x) 0.2 0.2 0.2 0.1
Net Cash from Invt. activities (4,764) (11,505) (8,995) (8,895) Net Working Capital (Days) 122 113 113 113
Issue of share cap. / premium (37) 0 - - Valuation(x)
Debt changes (796) (1,301) 5,673 1,574 PER 27.5 40.0 25.1 23.4
Dividend paid (439) (343) (685) (734) P/B 6.2 5.4 4.5 3.8
Interest paid (1,336) (989) (1,142) (1,396) P/CEPS 23.2 29.4 19.6 17.9
Others (33) 1 1 1 EV/EBITDA 18.1 23.9 15.6 14.1
Net cash from Fin. activities (2,641) (2,632) 3,847 (555) EV/Sales 6.3 7.1 5.1 4.6
Net change in cash (16) 486 4,653 7,439 Dividend Yield (%) 0.1 0.1 0.2 0.2
Free Cash Flow 639 2,123 (199) 6,889 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q2FY23 Q3FY23 Q4FY23 Q1FY24
Net Revenue 14,613 14,179 14,714 12,093
YoY gr. (%) 51.6 41.2 37.0 (9.3)
Raw Material Expenses 3,913 3,829 4,038 3,461
Gross Profit 10,701 10,351 10,677 8,631
Margin (%) 73.2 73.0 72.6 71.4
EBITDA 5,358 5,232 5,293 3,479
YoY gr. (%) 81.3 65.9 59.7 (24.2)
Margin (%) 36.7 36.9 36.0 28.8
Depreciation / Depletion 572 601 638 655
EBIT 4,786 4,631 4,655 2,824
Margin (%) 32.8 32.7 31.6 23.4
Net Interest 230 381 348 280
Other Income 243 214 186 146
Profit before Tax 4,799 4,464 4,493 2,690
Margin (%) 32.8 31.5 30.5 22.2
Total Tax 1,226 1,159 1,174 678
Effective tax rate (%) 25.6 26.0 26.1 25.2
Profit after Tax 3,572 3,305 3,319 2,012
Minority interest 40 (11) - -
Share Profit from Associates - - - -
Adjusted PAT 3,612 3,295 3,319 2,011
YoY gr. (%) 74.4 61.0 49.8 (33.7)
Margin (%) 24.7 23.2 22.6 16.6
Extra Ord. Income / (Exp) - - - -
Reported PAT 3,612 3,295 3,319 2,011
YoY gr. (%) 74.4 61.0 49.8 (33.7)
Margin (%) 24.7 23.2 22.6 16.6
Other Comprehensive Income (31) 184 (3) (15)
Total Comprehensive Income 3,582 3,478 3,316 1,997
Avg. Shares O/s (m) 110 110 110 110
EPS (Rs) 32.9 30.0 30.2 18.3
Source: Company Data, PL Research

September 15, 2023 47

 SRF (SRF IN)
Rating: HOLD | CMP: Rs2,371 | TP: Rs2,143

September 15, 2023 Fluorochemicals to continue league

Company Report We initiate coverage on SRF Limited (SRF) with ‘Hold’ rating and TP of 2,143
(implied consol Sep’ 25E EV/EBITDA of 11x). SRF is structurally placed to
maintain its leadership position in chemicals business given 1) proposed
capacity expansion of ~35% in refrigerants by FY24E, 2) addition of 5,000mtpa
PTFE capacity by H2FY24, 3) in-house process development of HFO to aid
Key Financials - Consolidated long term growth post patent expiry and 4) planned launch of 6-7
Y/e Mar FY23 FY24E FY25E FY26E
agrochemical ingredients in next 2-3 years. The company has debottlenecked
Sales (Rs. m) 1,48,703 1,40,029 1,59,142 1,75,905
EBITDA (Rs. m) 35,292 31,115 35,902 41,340 its South African packaging films capacity by 15% in FY23 and is adding
Margin (%) 23.7 22.2 22.6 23.5 21,000mtpa aluminium foil capacity by Q3FY24. Additionally, healthy balance
PAT (Rs. m) 21,623 16,817 19,324 22,243
EPS (Rs.) 72.9 56.7 65.2 75.0
sheet and strong financials (despite large capex) provide us further comfort.
Gr. (%) 14.5 (22.2) 14.9 15.1 We expect Revenue/EBITDA/PAT CAGR of 6%/5%/1% over FY23-26E. SRF
DPS (Rs.) 8.8 6.8 7.8 9.0
trades at 24x FY24 EV/EBITDA and 42x FY24 EPS despite muted growth
Yield (%) 0.4 0.3 0.3 0.4
RoE (%) 22.9 15.2 15.3 15.4 prospects and does not leave much upside for the investors. Accordingly, we
RoCE (%) 22.1 15.2 15.4 15.8 initiate coverage with ‘Hold’ rating.
EV/Sales (x) 4.9 5.3 4.7 4.2
EV/EBITDA (x) 20.8 23.7 20.7 18.1
PE (x) 32.5 41.8 36.4 31.6 Chemicals segment – key growth driver: Over FY19-23 chemicals segment grew
P/BV (x) 6.8 6.0 5.2 4.5
at +30% CAGR primarily driven by 1) volume growth across fluorochemicals and 2)
specialty chemicals business. The contribution of specialty chemicals business in
the segment grew from ~40% to 56% over FY19-23 led by addition of new Active
Intermediates (AIs) like P32 and P17 and value added products. Further, it intends
to launch 6-7 new AIs in next 2-3 years. In fluorochemicals segment, the company
Key Data SRFL.BO | SRF IN
is adding 7,500mtpa of R22 capacity in FY24E and 15,000mtpa of R32 swing
52-W High / Low Rs.2,845 / Rs.2,040
Sensex / Nifty 67,839 / 20,192 capacity (R134a/125) by Oct’23. Additionally, it has successfully conducted lab
Market Cap Rs.703bn/ $ 8,448m
trials for HFO through non-patented process and awaits application patent to expire
Shares Outstanding 296m
3M Avg. Daily Value Rs.1494.5m before commercialization of the same. The company is also expected to foray into
PTFE with start of 5,000mtpa plant in H2FY24. This will also open the doors for
foray into other fluoropolymers like PVDF, FKM and FEP which find increasing
applications across new age industries like batteries, solar and semi-conductors
among others. Consequently, we expect the segment to grow at 11% CAGR over
Shareholding Pattern (%)
FY23-FY26E.
Promoter’s 50.53
Foreign 20.04
Domestic Institution 13.71 Uncertainty expected in packaging segment: In the packaging segment, the
Public & Others 15.72
Promoter Pledge (Rs bn) - company expanded its BOPP (Biaxially Oriented Polypropylene) facility by 55% in
FY23. Along with the upcoming 21,000mtpa aluminium foil project, SRF would be
among the very few globally offering packaging solutions in all three substrates.
However, due to capacity additions globally, near term glut is expected to persist
for some time to come. Conservatively, we forecast revenues of Rs48bn in FY26E,
Stock Performance (%) below Rs52bn achieved in FY23.
1M 6M 12M
Absolute 3.4 4.3 (16.0)
Relative (0.3) (11.5) (25.8) Technical textiles facing headwinds: Technical textiles business grew at 2%
CAGR during FY19-23 on the back of demand from OEM space owing to uncertain
Swarnendu Bhushan environment in auto sector coupled with Covid-19 restrictions. Being proxy play to
[email protected] | 91-22-66322260 automotive industry, this segment is expected to grow on the back of higher
automobile sales. Further, demand for belting fabrics remains healthy given stable
outlook for end user industries such as steel, coal, power etc. We expect 3% CAGR
for the segment over FY23-FY26E given growth in Nylon Tyre Cord Fabric & belting
fabric business.

September 15, 2023 48

 SRF

Story in Charts

Revenues to grow 6% CAGR led by chemicals Chemicals mix to improve to 58% by FY26E

Revenue (Rs mn) YoY gr. (RHS) Chemicals Bu sin ess (CB ) Packaging Film B usi ness (PFB)
Technical Textile Business (TTB) Others
2,00,000 60%
48% 4% 3% 3% 3% 3% 3% 3%
50%
15% 17% 13% 14% 12% 12%
1,50,000 19%
40%

27%
29%
29%
35%
39%

38%
30%

36%
20%
1,00,000 17%
14% 20%
11%
1,48,703

1,59,142

1,75,905
1,24,337

1,40,029

58%
10%

56%
55%
2%
72,094

84,000

50%
50,000

43%

42%
41%
-6% 0%
- -10%
FY20 FY21 FY22 FY23 FY24EFY25EFY26E FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Margins at 23% led by value added products PAT to grow at 1-2% CAGR over FY23-FY26E

EBITDA (Rs mn) Margins (RHS) PAT (Rs mn) Margins (RHS)
15.2%
45,000 30.0% 25,000 14.3% 14.5% 16.0%
25.5% 25.5%
40,000 23.7% 23.5% 12.7% 12.6% 14.0%
22.2% 22.6% 25.0% 12.0% 12.1%
35,000 20.2% 20,000
12.0%
30,000 20.0% 10.0%
15,000
25,000
15.0% 8.0%
20,000
10,000 6.0%
15,000 10.0%
11,983

18,889

21,623

16,817

19,324

22,243
4.0%
14,549

21,452

31,759

35,902

41,340
35,292

31,115

9,159

10,000 5,000
5.0% 2.0%
5,000
0 0.0% 0 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

Return Ratios at 15-16% due to capex Despite heavy capex, Net D/E to be 0.3x

ROE ROCE Net Debt (Rs mn) Net Debt/Equity (RHS)

0.8
30.0% 50,000 0.8
24.5%
22.9% 0.7
25.0% 20.3% 40,000
0.6
20.0% 17.2% 23.8%
22.1% 15.2% 15.3% 15.4% 30,000 0.4 0.5
15.0% 0.3 0.3 0.3 0.3 0.4
17.6% 0.3
15.2% 15.4% 15.8% 20,000 0.3
10.0% 12.7%
0.2
37,229

27,633

35,528

41,801

43,759
26,964

32,476

5.0% 10,000
0.1
0.0% 0 0.0
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL Source: Company, PL

September 15, 2023 49

 SRF

SRF – Fluorospecialty brightens outlook

SRF Limited is a chemical based multi-business entity engaged in manufacturing

of industrial and specialty intermediates. Incorporated in 1970, Shree Ram Fibres
(SRF) is promoted by one of the oldest business groups in India, the Shriram Group,
founded by Sir Lala Shri Ram. SRF started with nylon tyre cord and thereafter
diversified into refrigerant gases, specialty chemicals and packaging film among
other. It’s manufacturing facilities are located across India, South Africa, Thailand
and Hungary.

SRF’s business profile comprises of 1) Chemicals (50% revenue & 32% EBIT
margin), 2) Packaging films- BOPET and BOPP films (35% revenue & 11% EBIT
margin) and 3) Technical Textile - nylon and polyester, tyre cord, belting fabrics,
industrial yarns (13% revenue & 14% EBIT margin).

Business Overview:

 Chemicals: Chemical business primarily consists of two sub-segments: (i)

Fluorochemicals which includes refrigerants, pharma propellants, and
industrial chemicals and (ii) Specialty chemicals which supplies intermediates
to global agrochemical and pharmaceutical majors. Within fluorochemicals,
refrigerants overall capacity stands at 62,500mtpa expected to rise by 35% in
FY24E.

 Packaging Films: SRF manufactures Bi-axially Oriented Polyethylene

Terephthalate (BOPET), Bi-axially Oriented Polypropylene (BOPP) films and
also offers a range of metallized and coated film products to its customers. It
provides packaging solutions to food and non-food category of FMCG and
industrial products. The company has installed capacity of 170,000mtpa in
BOPP and 203,500mtpa in BOPET and is adding 21,000mtpa aluminum foil
capacity in Q3FY24.

 Technical Textiles: This involves sale of Nylon Tyre Cord Fabrics (NTCFs),
polyester tyre cord fabrics, belting fabrics and polyester industrial yarn. NTCF
is a key product under this segment (contributing ~70-75% revenue). SRF has
40% share in India’s NTCF market and is 5 th largest player globally. It is also
2nd largest manufacturer of conveyor belting fabrics in the world.

Product Profile
Segments Subsegments Products Applications Domestic Peers Global Peers
API Intermediates/ AI Agrochemicals,
Specialty Chemicals
Applications Pharmaceuticals
Chemours, Honeywell,
Chemicals Business Air conditioners, NFIL, GFL, Tanfac
R134a, R22, R410a, 3M, Daikin, Dongyue
Fluorochemicals pharma, automobile,
R407c
AC, refrigerators etc
Packaging Films FMCG, Soaps, food, Uflex, EPL, Jindal Berry Global Group,
BOPP, BOPET
Business agro, solar panels etc Polyfilms Avient Corp etc
Tyre cord Fabrics,
Technical Textiles Tyres, seat belts, Berry Global, Aashi
belting fabrics and Century Enka Ltd
Business conveyor belts Kasei etc
industrial yarn
Coated Fabrics, Architecture,lifestyle,
Others
laminated fabrics sports etc

Source: Company, PL

September 15, 2023 50

 SRF

Investment Rationale
Chemicals segment - The key growth driver

 SRF is a market leader in fluorine chemistry with more than 25 years of

experience in handling fluorine molecules. Its strong knowledge of fluorination
and focus on R&D had led to development of complex organo-fluorine
compounds. SRF’s chemical segment consists of two sub-segments: 1)
Fluorochemicals (refrigerants and fluoropolymers) and 2) Specialty chemicals.

Mandatary installation of AC systems  Fluorochemicals: In refrigerants SRF’s basket includes

in truck cabins expected to bolster the
hydrochlorofluorocarbon-22 (HCFC-22), HFC -32, the new-generation
domestic demand for ref
gases/fluorochemicals going ahead. refrigerants – hydrofluorocarbon-134a (HFC-134a) and HFC blends such
(new avenue for industry growth) as R410A, R404A and R407C. The company is adding 7,500mtpa of R22
capacity and 15,000mtpa swing capacity (R134a/125) for R32 by Oct’23.
Although refrigerant demand in FY24 has been lackluster so far, the
company would benefit from expansions once the demand normalizes. In
fluoropolymers the company is adding 5,000mtpa PTFE capacity by
H2FY24 at a cost of Rs11bn. While this capacity is small in comparison to
18,000mtpa of GFL, the foray enables entry into other valuable grades like
FKM, FEP in future.

 Specialty chemicals: Within specialty chemical business, 80-85%

contribution comes from global innovators such as Corteva, BASF, Solvay,
Adama etc. while global generics players contributed 10-15% to chemical
revenues as of FY23. The company intends to launch 6-7 AIs in next 2-3
years. Company plans to double its revenue share from pharmaceuticals
intermediates portfolio to 25% in next few years (currently 9-10% of
chemicals business).

 RM availability, a key strength: SRF manufactures RMs such as chloroform,

Overall, the Indian PTFE market trichloro-ethylene, perchloroethylene etc. While chloroform is internally
demand stood at 5,700mtpa in CY20 consumed for manufacturing HCFC-22, HFC-134a and HFC 125 are
and is expected to reach 9,270mtpa
backward integrated into trichloroethylene/perchloroethylene respectively. We
by CY27, growing at a healthy CAGR
of 7%, according to Maximize Market believe there is abundant availability of raw materials to speed-up company’s
Research. performance.

 11% CAGR in Chemicals business: SRF intends to spend ~Rs25bn each

year in chemicals segment. In the industrial chemicals segment, it is expanding
chloromethane capacity to 100,000mtpa as of FY24E. We expect 11% revenue
CAGR in chemicals segment in FY23-26E led by 1) commissioning of Rs 11bn
capex, 2) PTFE commercialization and 3) demand recovery for existing
refrigerants/fluorochemicals.

September 15, 2023 51

 SRF

Capex & increasing demand to drive chemicals performance

Revenue (Rs mn) EBIT (Rs mn) EBIT Margins

1,02,530
1,20,000 32% 35%

88,805
27% 30%

76,418
1,00,000 27%

74,109
25% 25%
25%
80,000 20%

52,408
17% 17% 20%
16%

36,449
60,000

29,750
15%

25,632
24,454

23,407

22,201
20,633
16,114
40,000

13,969
10%

7,281
5,115
3,843
2,694
20,000 5%

- 0%
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

Uncertainty expected in packaging business

SRF manufactures Bi-axially Oriented Polyethylene Terephthalate (BOPET), Bi-

axially Oriented Polypropylene (BOPP) films which are widely used in applications
such as food, plastics, packaging, detergents, soaps, solar panels, labelling etc.

 Adding third substrate: Aluminum Foil is a very thin sheet which provides
great protection against light and oxygen. It is extensively used in primary
packaging and industries such as food, pharmaceuticals, cosmetics, industrial
packaging etc. and increases company’s offering to consumers in the segment.
China is world’s largest producer and exporter of aluminum foil whereas India,
Thailand and South Korea have been largest destinations for exports of
Chinese aluminum foil. According to management, the domestic market size
for aluminum foil stands at ~200,000mtpa and is expected to grow in the range
of 8-8.5% annually led by increased use by packaging industries.

 Capturing ~10% of domestic market: Company is setting up an aluminum

foil manufacturing facility (capacity of 21,000mtpa) at Jaitapur near Indore in
Madhya Pradesh by incorporating a wholly owned subsidiary SRF Altech with
a capex of ~Rs 4.3bn. Management expects asset turns of ~1.75-2x with an
IRR of ~15-18% in this business.

According to management, domestic  Concerns on margins: EBIT margin in the packaging segment has come off
market size of aluminum foil stands at
from 18% in 1QFY16-1QFY23 to 6% post that and 4.1% in past two quarters.
200,000 MTPA growing at 8-8.5%
annually led by increasing use in Margins in both BOPET and BOPP are likely to remain under pressure, as new
packaging industries. lines have been added; besides several more lines are in pipeline globally.

We build in slow recovery of 9-10% EBIT margin over FY25-26E with demand
normalization. We also expect drop in revenues over FY23-26E.

September 15, 2023 52

 SRF

Performance impacted due to uncertain environment

Revenue (Rs mn) EBIT (Rs mn) EBIT Margins (RHS)

10,000 27.3% 30.0%

9,000
8,000 21.3%
25.0%
19.8%
7,000 20.0%
6,000 15.5%
5,000 12.9% 15.0%
10.7% 10.2%
4,000 9.9%

3,000 6.7% 10.0%

2,000

2,298

4,115

5,556

8,979

9,463

5,562

2,703
2,703

4,553

4,898
2,298

4,115

5,556

8,979

9,463

5,562

4,553

4,898
5.0%
1,000
- 0.0%
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

Technical Textiles facing headwinds

SRF is the largest manufacturer of technical textiles in India with product basket
varying from sale of Nylon Tyre Cord Fabrics (NTCFs), polyester tyre cord fabrics,
belting fabrics and polyester industrial yarn. NTCF has been a key product under
this business segment (contributing ~70-75% revenue).

 Technical textiles business grew at 2% CAGR over FY19-FY23 due to muted

demand in OEM space owing to uncertain environment in auto sector coupled
with Covid-19 restrictions.

 Being proxy play to automotive industry, we believe the segment will grow on
the back of higher automobile sales. While demand in belting fabrics remains
healthy due to stable outlook for end user industries such as steel, coal, power
etc.

 We build in revenues CAGR of 3% over FY23-FY26E for the segment with

EBIT margin of ~12%, in-line with historic averages.

Slow growth over FY23-FY26E on account of headwinds

Revenue (Rs mn) EBIT (Rs mn) EBIT Margins (RHS)

25,000 22.7% 25.0%

20,000 20.0%
15.1%
13.8% 14.4% 13.8%
15,000 13.0% 15.0%
12.0% 12.0%
11.2%

10,000 10.0%
4,714

2,711
2,615

2,617
2,529

2,383
2,270
1,769
1,515
18,360

17,315

13,526

12,314

20,733

18,913

18,913

19,859

20,854

5,000 5.0%

- 0.0%
FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 15, 2023 53

 SRF

Financial Analysis

Revenue CAGR of 6% over FY23-26E

Between FY19-23 topline grew at 20% CAGR driven by volume growth primarily
from specialty chemicals business (which grew at 41% CAGR in the same period).
Going forward, we expect 11% CAGR in chemicals segment led by fluorochemicals
capacity expansion and new product launches in specialty chemicals business.
Overall, we believe topline to grow 6% CAGR over FY23-FY26E.

Revenue CAGR of 6% over FY23-26E

Revenue (Rs mn) YoY gr. (RHS)

2,00,000 60%
1,80,000 48%
50%
1,60,000
1,40,000 40%
1,20,000 30%
1,00,000 20%
17%
80,000 14% 20%
11%
60,000 10%
1,24,337

1,59,142

1,75,905
1,48,703

1,40,029
2%
84,000
72,094

40,000
-6% 0%
20,000
- -10%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

EBITDA CAGR of 5% over FY23-26E

Over FY19-23, EBITDA grew 28% CAGR driven by higher realizations and better
opex. We expect ~5% EBIDTA CAGR over FY23-26E, while EBITDA margins to
remain stable at around 23%.

EBITDA CAGR of 5% over FY23-26E

EBITDA (Rs mn) Margins (RHS)

45,000 30.0%
25.5% 25.5%
40,000 23.7% 23.5%
22.2% 22.6% 25.0%
35,000 20.2%
30,000 20.0%
25,000
15.0%
20,000
15,000 10.0%
10,000
14,549

21,452

31,759

35,292

31,115

35,902

41,340

5.0%
5,000
0 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 15, 2023 54

 SRF

PAT CAGR of ~1% over FY23-26E

Over FY19-FY23, PAT grew +30% CAGR driven by EBITDA, however we believe
PAT to grow at low single digit over FY23-FY26E and PAT margins to be 12%.

PAT CAGR of ~1% over FY23-26E

PAT (Rs mn) Margins (RHS)

15.2%
25,000 14.3% 14.5% 16.0%
12.7% 12.6% 14.0%
12.0% 12.1%
20,000
12.0%

15,000 10.0%
8.0%
10,000 6.0%
4.0%

11,983

18,889

21,623

16,817

19,324

22,243
5,000
9,159

2.0%
0 0.0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: Company, PL

September 15, 2023 55

 SRF

Valuations
 SRF is expanding its refrigerants capacity by 35% to 84,500mtpa (overall) by
FY24E and has also developed its own process technology for HFO, which will
aid revenue growth (upon expiry of patents).

 60-70% of specialty chemicals business comes from agrochemicals. The

company plans to launch 6-7 AIs in next 2-3 years to aid company’s topline.

 We are optimistic on SRF given healthy performance from specialty chemicals

business, strong balance sheet and deployment of capex for high-growth
specialty chemicals business over next few years to tap opportunities emerging
from agrochemical and pharma industries. We expect Revenue/EBITDA/PAT
CAGR of 6%/5%/1% over FY23-26E.

 The stock currently trades at 24x FY24 EV/EBITDA and 43x FY24 EPS and
does not leave much upside for the investors. We initiate coverage with ‘HOLD’
rating and SOTP based target price of Rs 2,143.

Valuation Table (SOTP Based)

EBITDA Target
Total Enterprise
(Rs mn) EV/EBITDA
Value (Rs mn)
Sep’25 multiple
Specialty Chemicals 30,378 20 6,07,556
Packaging Films Business 7,006 7 49,039
Technical Textiles Business 3,083 7 21,584
Total Enterprise Value 40,467 6,78,179
less : Net Debt 43,759
6,34,420
No of shares 296
TP 2,143

Source: PL

Key Risks

Volatility in fluorspar prices: Under chemical business, company uses fluorspar

as a key raw material. We believe, any major fluctuation in fluorspar prices globally
may have a corresponding impact on its margins and profitability.

Increasing competition in refrigerants business a concern: With global and

domestic manufacturers entering new age fluoropolymers and refrigerants such as
R32 and R125, company’s performance may be impacted going ahead.

Delay in commercialization of PTFE: Company’s inability to manufacture PTFE,

on time, to drag overall performance.

September 15, 2023 56

 SRF

Annexure

Key Managerial Personnel

Member Designation
Arun Bharat Ram Chairman Emeritus
Ashish Bharat Ram Chairman and Managing Director
Kartik Bharat Ram Joint Managing Director
Pramod G Gujarathi Director, Safety & Environment
Vellayan Subbiah Non-Executive, Non-Independent Director
Tejpreet S Chopra Independent Director
Lakshman Lakshminarayan Independent Director
Bharti Gupta Ramola Independent Director
Puneet Yadu Dalmia Independent Director
Yash Gupta Independent Director
Raj Kumar Jain Independent Director
Source: Company, PL

Installed Capacities (Chemicals- Product-wise)

Existing Total capacity
List of Products
capacity (after addition)
Ethyldifluoroacetate & Others 25,100 34,650
Trichloroethylene & other chlorine compounds 1,50,000 3,00,000
Chlorotrifluoroethane (HCFC 133a) 500 500
HFC 134a & others 75,000 75,000
Anhydrous hydrochloride acid 1,500 14,760
Dicalcium Phosphate 50,000 50,000
Tetrahydrofuran 20,000 20,000
PTFE 10,000 10,000
IPA 50,000 50,000
Calcium chloride 50,000 2,82,130
HFC 22 25,000 25,000
Ethanol 684 2,371
Source: Company, PL

September 15, 2023 57

 SRF

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY23 FY24E FY25E FY26E Y/e Mar FY23 FY24E FY25E FY26E

Net Revenues 1,48,703 1,40,029 1,59,142 1,75,905 Non-Current Assets

YoY gr. (%) 19.6 (5.8) 13.6 10.5
Cost of Goods Sold 73,935 68,165 77,407 83,905 Gross Block 1,30,996 1,60,452 1,90,452 2,20,452
Gross Profit 74,767 71,863 81,735 92,000 Tangibles 1,25,785 1,55,241 1,85,241 2,15,241
Margin (%) 50.3 51.3 51.4 52.3 Intangibles 5,211 5,211 5,211 5,211
Employee Cost 8,138 9,102 9,867 10,906
Other Expenses 31,337 31,646 35,966 39,754 Acc: Dep / Amortization 30,498 37,784 46,556 56,829
Tangibles 29,306 36,592 45,365 55,638
EBITDA 35,292 31,115 35,902 41,340 Intangibles 1,191 1,191 1,191 1,191
YoY gr. (%) 11.1 (11.8) 15.4 15.1
Margin (%) 23.7 22.2 22.6 23.5 Net fixed assets 1,00,498 1,22,668 1,43,896 1,63,623
Tangibles 96,479 1,18,649 1,39,876 1,59,604
Depreciation and Amortization 5,753 7,286 8,773 10,273 Intangibles 4,019 4,019 4,019 4,019

EBIT 29,539 23,829 27,129 31,067 Capital Work In Progress 24,055 24,599 24,599 24,599
Margin (%) 19.9 17.0 17.0 17.7 Goodwill - - - -
Non-Current Investments 4,374 2,733 2,733 2,733
Net Interest 2,048 2,391 2,496 2,621 Net Deferred tax assets (7,906) (7,906) (7,906) (7,906)
Other Income 749 525 603 603 Other Non-Current Assets 682 682 682 682

Profit Before Tax 28,240 21,962 25,236 29,049 Current Assets

Margin (%) 19.0 15.7 15.9 16.5 Investments 4,901 4,901 4,901 4,901
Inventories 22,743 19,182 21,800 24,097
Total Tax 6,617 5,146 5,913 6,806 Trade receivables 17,856 16,815 19,110 21,123
Effective tax rate (%) 23.4 23.4 23.4 23.4 Cash & Bank Balance 6,165 8,168 4,554 4,928
Other Current Assets 2,348 2,211 2,513 2,778
Profit after tax 21,623 16,817 19,324 22,243 Total Assets 1,87,545 2,05,664 2,28,973 2,54,069
Minority interest - - - -
Share Profit from Associate - - - - Equity
Equity Share Capital 2,974 2,964 2,964 2,964
Adjusted PAT 21,623 16,817 19,324 22,243 Other Equity 1,00,296 1,15,046 1,32,001 1,51,526
YoY gr. (%) 14.5 (22.2) 14.9 15.1 Total Networth 1,03,271 1,18,010 1,34,965 1,54,490
Margin (%) 14.5 12.0 12.1 12.6
Extra Ord. Income / (Exp) - - - - Non-Current Liabilities
Long Term borrowings 23,115 29,115 29,115 29,115
Reported PAT 21,623 16,817 19,324 22,243 Provisions 608 608 608 608
YoY gr. (%) 14.5 (22.2) 14.9 15.1 Other non current liabilities 3,293 3,293 3,293 3,293
Margin (%) 14.5 12.0 12.1 12.6
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt 20,425 19,481 22,140 24,472
Total Comprehensive Income 21,623 16,817 19,324 22,243 Trade payables 22,313 21,011 23,879 26,394
Equity Shares O/s (m) 296 296 296 296 Other current liabilities 6,428 6,053 6,879 7,604
EPS (Rs) 72.9 56.7 65.2 75.0 Total Equity & Liabilities 1,87,545 2,05,664 2,28,973 2,54,069
Source: Company Data, PL Research Source: Company Data, PL Research

September 15, 2023 58

 SRF
Cash Flow (Rs m) Key Financial Metrics
Y/e Mar FY23 FY24E FY25E FY26E Year
Y/e Mar FY23 FY24E FY25E FY26E

PBT 28,240 21,962 25,236 29,049 Per Share(Rs)

Add. Depreciation 5,753 7,286 s8,773 10,273 EPS 72.9 56.7 65.2 75.0
Add. Interest 2,048 2,391 2,496 2,621 CEPS 92.4 81.3 94.8 109.7
Less Financial Other Income 749 525 603 603 BVPS 348.4 398.1 455.3 521.2
Add. Other (1,343) (525) (603) (603) FCF 2.1 (2.5) (6.8) 9.4
Op. profit before WC changes 34,698 31,115 35,902 41,340 DPS 8.8 6.8 7.8 9.0
Net Changes-WC (604) 3,294 (2,030) (1,781) Return Ratio(%)
Direct tax (5,077) (5,159) (5,884) (6,781) RoCE 22.1 15.2 15.4 15.8
Net cash from Op. activities 29,017 29,250 27,988 32,778 ROIC 18.2 12.6 12.6 12.7
Capital expenditures (28,243) (30,000) (30,000) (30,000) RoE 22.9 15.2 15.3 15.4
Interest / Dividend Income 273 525 603 603 Balance Sheet
Others (1,644) 1,641 - - Net Debt : Equity (x) 0.3 0.3 0.3 0.3
Net Cash from Invt. activities (29,614) (27,834) (29,397) (29,397) Net Working Capital (Days) 45 39 39 39
Issue of share cap. / premium - (10) - - Valuation(x)
Debt changes 6,599 5,056 2,659 2,332 PER 32.5 41.8 36.4 31.6
Dividend paid (2,133) (2,018) (2,319) (2,669) P/B 6.8 6.0 5.2 4.5
Interest paid (1,945) (2,391) (2,496) (2,621) P/CEPS 25.7 29.2 25.0 21.6
Others (325) (49) (49) (49) EV/EBITDA 20.8 23.7 20.7 18.1
Net cash from Fin. activities 2,196 587 (2,205) (3,007) EV/Sales 4.9 5.3 4.7 4.2
Net change in cash 1,599 2,003 (3,614) 374 Dividend Yield (%) 0.4 0.3 0.3 0.4
Free Cash Flow 635 (750) (2,012) 2,778 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q2FY23 Q3FY23 Q4FY23 Q1FY24
Net Revenue 37,278 34,697 37,781 33,384
YoY gr. (%) 31.3 3.7 6.4 (14.3)
Raw Material Expenses 19,529 16,944 18,884 17,005
Gross Profit 17,749 17,753 18,897 16,379
Margin (%) 47.6 51.2 50.0 49.1
EBITDA 7,691 8,335 9,316 6,962
YoY gr. (%) 14.0 (5.4) (1.7) (30.0)
Margin (%) 20.6 24.0 24.7 20.9
Depreciation / Depletion 1,393 1,507 1,546 1,566
EBIT 6,298 6,829 7,770 5,396
Margin (%) 16.9 19.7 20.6 16.2
Net Interest 445 620 659 656
Other Income 327 100 223 118
Profit before Tax 6,181 6,309 7,334 4,858
Margin (%) 16.6 18.2 19.4 14.6
Total Tax 1,371 1,200 1,709 1,265
Effective tax rate (%) 22.2 19.0 23.3 26.0
Profit after Tax 4,810 5,109 5,625 3,593
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 4,810 5,109 5,625 3,593
YoY gr. (%) 25.8 1.1 (7.1) (40.9)
Margin (%) 12.9 14.7 14.9 10.8
Extra Ord. Income / (Exp) - - - -
Reported PAT 4,810 5,109 5,625 3,593
YoY gr. (%) 25.8 1.1 (7.1) (40.9)
Margin (%) 12.9 14.7 14.9 10.8
Other Comprehensive Income (1,526) - - -
Total Comprehensive Income 3,284 5,109 5,625 3,593
Avg. Shares O/s (m) 296 296 296 296
EPS (Rs) 16.2 17.2 19.0 12.1
Source: Company Data, PL Research

September 15, 2023 59

 Fluorochemicals

Notes

September 15, 2023 60

 Fluorochemicals

Notes

September 15, 2023 61

 Fluorochemicals

Notes

September 15, 2023 62

 Fluorochemicals
Navin Fluorine International Gujarat Fluorochemicals

(Rs) (Rs)

4875 4100

4151 3192

3426 2284

2702 1377

1977 469
Sep - 21

Sep - 21
Sep - 20

Sep - 22

Sep - 23

Sep - 20

Sep - 22

Sep - 23
Mar - 21

Mar - 22

Mar - 23

Mar - 21

Mar - 22

Mar - 23
SRF

(Rs)

2850

2338

1826

1313

801
Sep - 21
Sep - 20

Sep - 22

Sep - 23
Mar - 21

Mar - 22

Mar - 23

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 Aarti Industries Hold 495 473
2 Bharat Petroleum Corporation Hold 353 352
3 Bharti Airtel Accumulate 935 890
4 Clean Science and Technology Hold 1,206 1,298
5 Deepak NIitrite Reduce 1,803 2,092
6 Gujarat Gas Accumulate 516 455
7 Gujarat State Petronet BUY 327 276
8 Hindustan Petroleum Corporation Hold 263 261
9 Indian Oil Corporation Hold 97 92
10 Mahanagar Gas Hold 1,056 1,056
11 NOCIL Hold 230 228
12 Oil & Natural Gas Corporation BUY 218 177
13 Oil India BUY 341 277
14 Reliance Industries BUY 2,898 2,444
15 Vinati Organics Accumulate 1,955 1,815

PL’s Recommendation Nomenclature

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

September 15, 2023 63

 Fluorochemicals

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Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer.

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India | Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
www.plindia.com

September 15, 2023 Digitally signed by Amnish Aggarwal

DN: c=IN, st=Maharashtra,
64
Amnish Aggarwal
2.5.4.20=21151ea12dd366d1ac370cb42343ee44b6e851c37bdbac5f86aa4ff3e6948487,
postalCode=400018, street=570,SADHNA HOUSE,PB
MARG,WORLI,Mumbai,Maharashtra-400018,
pseudonym=5359cd84fad1bdb19c658b8fa14b58ef,
serialNumber=7a6f13691881d5a8af6353865a61b48b7040e72f4a1bf53182e368b3ca14a5e4,
ou=NA, o=PRABHUDAS LILLADHER PRIVATE LIMITED, cn=Amnish Aggarwal
Date: 2023.09.15 18:26:11 +05'30'