Navin Fluorine - MD Resigns; Pretty Big Shoes To Fill: Nirmal Bang

Nirmal Bang Report

With regard to the successor to Mr. Welling, Navin Fluorine International Ltd. is definitely looking for an external candidate with key focus on execution capabilities and technological expertise.

The Nomination and Remuneration Committee is actively involved in the search. The management along with NRC is working towards additional measures required, if any, to address the attrition issue at the senior level management.

While we remain positive on Navin Fluorine’s strong positioning in the complex fluorination space, execution of future projects and strategic shift, if any, need to be closely monitored under the new leadership.

Maintain 'Buy'.

Performance under the leadership of Mr. Welling:

Under the leadership of current MD, Mr. Welling, Navin Fluorine has delivered a very strong performance (revenue/Ebitda/adjusted profit after tax compound annual growth rate of 20%/26%/26% over FY19-23). But, most importantly, Navin Fluorine offers much greater future visibility, unlike most other chemical companies in India.

Capex acceleration was concentrated mainly towards the high-value businesses over the last few years. Also, a large part of the capex was incurred towards the multi-year long-term contracts with the innovators in Global Pharmaceuticals and Agrochemicals space.

Contract development and manufacturing organisation, which differentiates Navin Fluorine from other Indian chemical companies, has reported two times revenue growth over the last four years with a significantly greater visibility in future.

As a result, revenue share of high-value businesses has increased from 50% in FY19 (similar to FY15-19 average) to 77% in FY23.

As per our current estimates, high-value segments should contribute more than 80% of the overall revenue and even higher in terms of profitability by FY26.

Update on ongoing projects and pipeline:

Management indicated that Navin Fluorine is run professionally with each division headed by a separate Chief Executive Officer and there are multiple touch-points when it comes to engaging with the customers. Therefore, ongoing projects such as R32 plant, Anhydrous Hydrofluoric plant and one specialty chemicals project should not get delayed during the transition phase.

The management alluded that with regards to future projects such as cGMP4 expansion, a delay of one-two months is expected considering the weak macros.

On an overall basis, NFIL expects to execute current and upcoming projects seamlessly. Also, customer relationships, including the ones with the innovators, should not be impacted, per management.

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