Navin Fluorine continues with order wins, embarked capex: ICICI Securities

Strong pipeline of growth opportunities, especially in agrochemicals, driven by principles of 3P: Product, Platform & Partnership

Navin Fluorine International Ltd (NFIL) operates one of the largest integrated fluorochemicals complexes in India with a presence in specialty chemicals, CRAMS, inorganic fluoride and refrigerant segments.

The company has two manufacturing facilities in Surat and Dewas while it is setting up a new greenfield capacity at Dahej. In terms of revenue contribution, specialty chemical constitutes 40% of overall revenue followed by CRAMS of 25% and the rest from refrigerant (~18%) and inorganic fluoride (~17%) businesses

Q4FY22 Results: The topline was largely in line while margins missed due to lower than anticipated gross margins.

1. Reported revenue growth was 21.6% YoY to Rs 409 crore, led by specialty chemical (up 21.4% YoY), inorganic fluoride (up 20.3% YoY), refrigerants (up 37.9% YoY). Revenue from CRAMS was up 15.8% YoY to Rs 88 crore
2. Gross margins were down 36 bps YoY to 51.9% while EBITDA margin contracted 200 bps YoY to 23%, due to higher other cost (up 29% YoY)  EBITDA was up 12% YoY to Rs 94.3 crore
3. Adjusted PAT increased 19% YoY to Rs 70.9 crore

Key triggers for future price performance:

1. Upcoming capex for specialty chemical and HPP to aid value added business revenue mix and thereby group return ratios
2. Potential entry into other key segments of fluorine molecules
3. Increase in custom synthesis/CRAMS business revenue

Key takeaways of recent quarter & conference call highlight

Q4FY22 Results: Decent growth across all segment led performance

High value business: Revenues were up 19.3% YoY to Rs 247 crore, led by both specialty chemical and CRAMS segments. The revenue from specialty chemical was up 21% YoY to Rs 159 crore while the same from CRAMS remained higher by 16% YoY to Rs 88 crore

Legacy business: Revenue increased 29.1% YoY to Rs 151 crore, driven by 20.3% YoY growth in the inorganic fluoride business to Rs 71 crore while refrigerant business was up 37.9% YoY to Rs 80 crore

Q4FY22 Earnings Conference Call highlights

1. Specialty Chemicals –

• Achieved record quarterly and annual revenues
• Price hike initiated to offset high input costs
• Strong pipeline of growth opportunities, especially in agrochemicals, driven by principles of 3P: Product, Platform & Partnership

2. CRAMS –

1. Achieved record annual sales in FY22
2. Focus on expanding project pipeline and further diversifying customer base
3. Debottlenecking of CGMP3 approved on the back of robust opportunity pipeline

3. Inorganic Fluorides –

• Achieved record annual sales driven by pricing
• Good traction seen from end user segments especially in India
• Optimised sales mix between domestic & international market for better profitability

4. Refrigerant Business –

• Growth in profitability driven by significant price increase despite higher input costs
• Exports sales impacted due to higher logistics cost
• Sales into non-emissive applications continues to look robust

New capex –New fluoro specialty molecule

• Investment - ~Rs 540 crore, peak revenue visibility of Rs 600 crore
• Funded by – Mix of Internal Accruals & Debt  Project Location – Dahej
• Total 50% of total volume will be sold to technological partner. The contract is entered on a cost + basis. Will have no effect in case of escalation price in inputs
• Rest 50% will either be sold in market at market price or will be used internally. The management believes demand for new molecules will remain extremely robust as they are only manufacture of molecule using the technology
• Technology adapted by management is environment friendly process
• Planning to take debt of Rs 200 crore for new project Impact on volatility in input cost on various project
• All four projects except MPP are primarily on cost through mechanism
• The company holds heavy inventory for key materials