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Centrum Broking Report
After several quarters, Navin Fluorine International Ltd. reported a subdued quarterly performance impacted by planned and unplanned shutdown of its hydrofluoroolefins plant (Honeywell).
Consequently, revenues/ Ebitda/profit after tax for Q1 declined 29.5%/ 43.4%/ 54.9% QoQ at Rs 4.9 billion/ Rs 1.1 billion/ Rs 615 million.
Management cited it as a one-off impact due to operational issues post planned shutdown and nothing to assign to the industry environment. Apart from HFO plant issue, contract development manufacturing organisation revenues too were lower QoQ due to lumpiness and execution of one large U.S. order in Q4 FY23.
Management did not cite any demand related challenges for any of its segments although demand remains volatile. We have lowered our FY24E estimates primarily considering some pricing pressure on HFO and only marginal uptick in CDMO.
Chemical sector is undergoing a challenging environment which has been impacting financial performance of companies.
It has prompted us to rejig the multiple for the sector and hence we have lowered Navin's target price/earning multiple from 45 times earlier to 40 times.
Nonetheless, we remain optimistic on the growth prospects of Navin and maintain 'Buy' with a reduced target price of Rs 5,267 (earlier Rs 5,768).
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