Missed opportunity? This specialty chemicals firm turned Rs 10,000 to over Rs 1.5 lakh in 6 years

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Shares of specialty chemical firm Navin Fluorine (NFIL) have been buzzing on Dalal Street due to over 1,500% return in the past five years coupled with a robust outlook for the sector. Analysts believe that the company is one of the biggest beneficiaries of the China+1 theme and it may double its revenue by FY23.

The scrip has jumped 1,568% to Rs 3,799 on July 2, 2021 from Rs 227.65 in July 2015. That means, a Rs 10,000 investment made in the company six years ago would have become Rs 1.66 lakh at present.

Report card

Net profit of the company has jumped 35% annually to Rs 299 crore in FY21 from Rs 49.39 crore in FY15. On the other hand, net sales increased by 13% annually to Rs 1133 crore from Rs 544 crore during the same period.

NFIL operates in four segments including refrigerants, inorganic fluorides, speciality chemicals, and CRAMs. With India emerging as a fluorination hub owing to the relocation of major downstream players from China, the company has announced two new projects as a part of its wholly-owned subsidiary (NFASL) over the past year.

There are expectations that the company may do a capital expenditure of Rs 730 crore during FY22-FY24. “Funding would happen largely through internal accruals. We expect EBITDA and adjusted profit after tax CAGR of 31% and 29% over FY21-24E, with stable EBITDA margin,” Motilal Oswal Financial Services said.

Should you buy?

Motilal Oswal Financial Services has a ‘Neutral’ rating on the stock with a price target of Rs 3,930. “We initiated coverage with a neutral rating, highlighting downside risk to our estimates with even a slightest of delay in execution and commissioning of the upcoming projects,” the brokerage said.

On the other hand, JM Financial added that it prefers contract manufacturing players like Navin Fluorine and PI Industries as they provide long term earnings visibility. “We believe the sharp run-up in the specialty chemicals space over last 1-2 years has capped the near term upside. However, India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process,” JM Financial said adding it has a ‘Buy’ rating on Navin with a target price of Rs 4,240 per share.