Recommendation from Chemical Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year. 

Navin Fluorine International Ltd.: POWERING INDIA’S FLUOROCHEMICAL FUTURE

HERE IS WHY
✓  Chemours deal for AI cooling.
✓  Profits and margins growing strong.
✓  60 per cent revenue from exports.

The Indian chemical industry is currently valued at USD 220 billion and is expected to reach USD 300 billion by 2030. The global fluorochemical market size was estimated at USD 28.7 billion in 2023 and is expected to reach USD 41.35 billion by 2030, exhibiting a CAGR of 5.35 per cent during 2023-30. India is emerging as a preferred manufacturing hub for specialty chemicals for domestic and export markets. With the rising global demand for fluorochemicals, we are recommending Navin Fluorine International (NFIL) in Choice Scrip for this issue of the magazine. NFIL belongs to a house of the Arvind Mafatlal Group. The company owns one of India’s largest integrated fluorochemicals complexes. It produces a wide range of fluorochemicals in the bulk, speciality segment and offers Contract Development and Manufacturing Organisation (CDMO). Its manufacturing facilities are located at Surat and Dahej in Gujarat and Dewas in Madhya Pradesh.

In Q4FY25, on a consolidated basis, revenue increased by 16.44 per cent YoY to ₹700.94 crore compared to ₹601.95 crore from the previous year’s same quarter. On a sequential basis, revenue increased by 15.63 per cent. PBIDT excluding other income increased by 62.39 per cent to ₹178.71 crore YoY as compared to ₹110.05 crore from the previous year’s same quarter, while sequentially increased by 21.32 per cent. Net profit stood at ₹94.98 crore compared to ₹70.38 crore, a YoY increase of 34.95 per cent, while sequentially increased by 13.61 per cent from ₹83.6 crore.

On the revenue front for Q4FY25, 46.57 per cent of the company’s revenue came from High Performance Products (HPP). These are advanced specialty chemicals or fluorochemicals designed for high-end and critical applications. HPPs include fluoropolymers used in semiconductors, aerospace components, pharmaceuticals, EV battery electrolytes, and specialty refrigerants with low global warming potential. Specialty chemicals contributed 37 per cent to the revenue, while the remaining 16.43 per cent came from the CDMO segment. Geographically, 38.90 per cent of the revenue came from India, while the remaining 61.10 per cent was generated from international markets.

NFIL has forged a strategic partnership with Chemours to enter the high-growth advanced materials sector, focusing on Opteon two-phase immersion cooling fluid for AI-driven data centre cooling. This collaboration involves establishing a manufacturing facility in Surat, with a USD 14 million capex (USD 5 million from Chemours), set to be operational by Q1FY27. The partnership positions NFIL to scale high-end, technology-driven products, with potential for expanded capacity as market demand grows.

The HPP Products segment, particularly R32, has been a key growth driver achieving 26 per cent YoY revenue growth in FY25. HPP assets deliver robust asset turns of 2x or higher, with the HFO asset reaching peak revenue potential. NFIL's FY26 capex plan of ₹500-600 crore includes the AHF plant, CGMP4 Phase 1 (Q3FY26), and the Chemours Octon project. The company’s share is currently trading at a PE of 79.2x compared to industry PE of 27.1x and its three-year median PE of 72.8x. Considering the company's business and its leading position in the market, we recommend a BUY.