Sell Gujarat Fluorochemicals; target of Rs 2800: Emkay Global Financial

Emkay Global Financial's research report on Gujarat Fluorochemicals

We believe the recent run-up in the stock is due to market enthusiasm about GFL’s battery chemicals business, where the optionality value of this business for FY28 has already been discounted in price. Based on our sensitivity-analysis workings, even if GFL is able to sell the possible expanded capacity of 15,000 tons of LiPF6 by FY28, the best-case value will add an incremental Rs316 to our target price. Thus, we believe that full ramp-up in the battery chemicals business has already been factored in the current market price.

Outlook

We expect FY24 to remain muted, on volume/pricing pressure; we tweak earnings by -14%/- 5%/+5% for FY24E/25E/26E. Maintain SELL, but increase our imputed multiple to 30x Dec-25E EPS (25x earlier), with TP of Rs 2,800, building-in the higher optionality value of battery chemicals based on our sensitivity workings.