Accumulate Gujarat Fluorochemicals; target of Rs 4550: KR Choksey

KR Choksey's research report on Gujarat Fluorochemicals

GFL Q2FY25 earnings mirrored our projections. Revenue stood at INR 11,880 Mn, up 25.4% YoY (+1.0% QoQ), driven by robust growth in the Fluoropolymers and Fluorochemicals segment partially offset by the weaker Bulk Chemical segment. EBITDA of INR 2,950 Mn, up 79.9% YoY (+12.6% QoQ), with EBITDA margin at 24.8% (+751bps YoY/+255bps QoQ). PAT stood at INR 1,210 Mn, +128.3% YoY (+12.0% QoQ); PAT margin stood at 10.2%, up 459bps YoY (+100bps QoQ). We increase our FY26 P/E multiple to 39.0x (previously: 33.0x) and FY26E EPS to INR 116.7 (previously: INR 111.4), driven by positive expectations regarding improving pricing conditions across key verticals. The company is well-positioned to gain market share in the fluoropolymers segment, supported by a better revenue mix emphasizing high-margin products leading to higher revenue and higher margins.

Outlook

We anticipate a turnaround in the legacy business in Q4FY25E, coinciding with the GFCL EV business starting its commercial operations in the same quarter. Consequently, we increase our target price to INR 4,550 (previously: INR 3,675) and maintain our “ACCUMULATE” rating.