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Navin Fluorine shares up 160% in 2020, brokerages say it can rise further

Analysts are positive about the prospects of the stock owing to the company's plans to expand its business.

December 30, 2020 / 10:32 AM IST
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Navin Fluorine International logged stellar gains in the pandemic-hit 2020 and brokerages say the stock is poised for scaling new highs in the year 2021.

As of December 29 close, Navin Fluorine International shares had jumped more than 160 percent in the calendar year 2020 to hit Rs 2,621 against a 14 percent rise in the benchmark Nifty. Analysts are positive about the stock owing to the company's plans to expand its business.

Narendra Solanki, Head-Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers, said to strengthen its specialty chemicals division, the company announced a Rs 195-crore capex in agro and pharma, which is expected to be funded through internal accruals and debt.

Moreover, the multi-purpose plant at its wholly-owned subsidiary, Navin Fluorine Advanced Sciences, at Dahej in  Gujarat is expected to be commissioned in the first half of FY23, with nearly 1.4 times asset turnover.

The expansion would help launch products of complex fluorinated chemistry and strengthening customer relations, Solanki said.


"With this multi-purpose plant, the company will have the capacity to manufacture five products, specifically in agro. Of the five products, three will be developed in-house and two with clients. Navin has another seven products in the pipeline catering to pharma and agro," Solanki said.

He has a "buy" recommendation on the stock, with a target price of Rs 3,000.

Brokerage firm Emkay Global, too, has a "buy" call on the stock with a target price of Rs 2,742.

"Large capex undertaking for the multi-purpose plant (MPP) ensures earnings growth in the longer term, in our view. We bake in new project contribution in FY23, and raise our revenue/EPS estimates by about 4 percent," Emkay said.

"PEG (price earning growth) ratio has been about 1 time in the last two years and we apply a nearly 38 percent premium in our PEG multiple due to lateral structural improvement in return ratios (RoE of 16 percent in FY22 to 22 percent in FY23)," said the brokerage.

Brokerage firm JM Financial, which has a "buy" call on the stock with a target price of Rs 2,900, said with a capex of about Rs 630 crore over the next two years, the company will add about Rs 800 crore revenue (at peak capacity) to the current revenue of nearly Rs 1,000 crore.

Brokerage firm ICICI Direct also has a "buy" on the stock with the target price at Rs 3,040. It has upgraded its PER multiple to 40 times (1.4 times PEG) from 35 times PER of FY23E.

As per the brokerage, the company's asset turn is expected to be 1.35-1.45 times with better operating margin visibility than the current profile.

Since 40 percent of the plant is vacant, it can be expanded by putting in more types of machinery,ICICI Direct said. This should support specialty chemical segment revenue growth in the high teens.

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Nishant Kumar
first published: Dec 30, 2020 10:32 am
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