Buy Gujarat Fluorochemicals; target of Rs 3215: KR Choksey

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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KR Choksey's research report on Gujarat Fluorochemicals

During the quarter GFL’s revenue came at INR 10,738 Mn (+27.78% YoY / +6.87% QoQ). The growth was mainly led by robust demand for its fluoropolymers(PTFE), followed by volumes and prices of Ref gas which has marginally improved during the quarter. For FY22, the consolidated revenue stood at INR 39,536 (+49.16% YoY). On operational front EBITDA stood at INR 3,315 Mn (+70% YoY / +5.10% QoQ), with OPM at 30.87% (+767 bps YoY/-55 bps QoQ). Elevated energy prices dented the margins QoQ. Net Profit stood at INR 2,185 Mn against INR 1,102 (+98%) on YoY basis and (+8.54% QoQ), with NPM at 20.35% (+723 bps YoY/+29bps QoQ). The company has declared a final dividend of INR 2 per share.

Outlook

We continue to maintain ‘BUY’ recommendation on the stock and apply P/E multiple of 31x to its FY24E earnings, which yields an increased revised target price of INR 3,215 per share.

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