Navin Fluorine - Long-Term Growth Unfazed By Near-Term Hiccup: Motilal Oswal
Change in leadership to have minimal impact; capex plans in place for driving next leg of growth.
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Motilal Oswal Report
On September 28, 2023, Mr. Radhesh Welling tendered his resignation as Managing Director of Navin Fluorine International Ltd. for personal reasons. The resignation will be effective from December 15, 2023 and he would continue to serve the company till then to ensure a smooth transition.
The company is searching for an external candidate as Mr. Welling’s replacement. In the interim, Mr. Vishad P. Mafatlal would steer the operations of the company.
Navin Fluorine does not expect any material impact on its existing relationships with customers or its ongoing and future capex plans due to the change in leadership.
Valuation and view
The high-performance product and specialty chemicals segments will drive robust growth (at 33-36% compound annual growth rate over FY23-25), with increasing use of fluorine in the pharma and agro space, battery chemicals and performance materials. Navin Fluorine has already identified various opportunities in the above mentioned spaces.
The management expects peak revenue for:
the agrochemical intermediate to be achieved in FY24, and
the MPP plant to be achieved in FY25. Two new molecules at the multipurpose plants plant are expected to be commissioned in CY23.
The stock is trading at 31.5 times FY25E earnings per share of Rs 121, with an expected improvement in return on equity to 19-21%, despite a huge capex (Rs 8 billion) over the next two years.
We value the company at 35 times FY25E EPS to arrive at our target price of Rs 4,245. We maintain our 'Neutral' rating on the stock as we believe valuations are rich and offer limited upside.
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