The share prices of SRF Ltd. and Navin Fluorine International Ltd. surged by double digits in early trade on Thursday, on reports that US gas distributors will raise prices for refrigerant gases. This can benefit company earnings, as per analysts.
SRF surged nearly 14% intraday to Rs 2,675, close to its 52-week high of Rs 2,693.95. The scrip was trading 11% higher as of 10:30 a.m. The relative strength index was 79, suggesting the stock was overbought.
Navin Fluorine gained 15% to hit a one-year high of Rs 4,017. The stock was trading 9% higher as of 10:30 a.m. The RSI was 72.
Igas USA, a leading American distributor of refrigerant gases, highlighted the challenges faced by the HVAC (Heating, Ventilation, and Air Conditioning) industry due to global supply constraints of R32 and R125. These shortages have led refrigerant gas producers to implement price hikes of up to 200% worldwide.
Igas also noted that no near-term price reductions are expected and indicated that the new, yet undisclosed, pricing would apply to all imported allocations in the US in 2025. Additionally, current pricing has been suspended, with order quantities potentially restricted and no pre-buys allowed.
There are only two domestic players i.e SRF and Navin Flourine who make third generation refrigerant gas and the capacity is also skewed towards SRF. India has anti dumping duty on HFC gases to protect the domestic industry.
SRF has a capacity of 29,000 to 30,000 tons of R32, while NFIL has 4,500 tons of R32 and expects to add another 4,500 tons by February this year, according to a note from Equirus. SRF also has a 7,000 tons capacity of R125.
The brokerage said every $1 per kilogram of change in R32 realisation could increase SRF's operating income by Rs 260 crore, while a similar change in R125 realisation could contribute Rs 60 crore.
For NFIL, starting from February 2025, the same change in R32 prices could result in an incremental operating income of Rs 77 crore.
Other chemical stocks like Alkyl Amines Ltd. and Balaji Amines Ltd. also jumped.
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