Gujarat Fluorochemicals Q1 growth accelerates on R32 volumes and fluoropolymers demand

Investment View and Valuation

Prabhudas Lilladher (PL) maintains a HOLD rating on Gujarat Fluorochemicals despite raising its target price to Rs4,498 from Rs3,772. The stock was trading at 53x FY28E EPS, compared with PL's valuation of 52x FY28E EPS. The broker expects Fluoropolymers to remain the company's primary growth driver, while Advanced Battery Materials should become a more meaningful medium-term contributor.

Q1FY27 Financial Performance

Gujarat Fluorochemicals reported consolidated Q1FY27 revenue of Rs15,880 million, up 24.0 per cent year on year and 16.0 per cent quarter on quarter. Revenue exceeded PL's estimate of Rs14,478 million by 9.7 per cent and consensus of Rs15,600 million.

Gross margin expanded to 66.3 per cent from 65.1 per cent in Q1FY26 and 63.3 per cent in Q4FY26. EBITDA margin was stable year on year and improved by 450 basis points sequentially. Reported PAT benefited partly from a lower tax rate of 25.0 per cent, compared with 41.0 per cent in Q4FY26.

Segment Performance and Operating Drivers

Fluorochemicals

Fluorochemicals revenue increased 51.7 per cent year on year and 43.6 per cent quarter on quarter to Rs4,580 million, led by higher R32 volumes and healthy growth across the refrigerant portfolio. The existing R32 plant operated at full utilisation in Q1FY27, and management expects incremental R32 capacity to be commissioned in Q2FY27. R32 sales address global markets through a mix of long-term contracts and spot business.

Management also highlighted a strong opportunity in R134a, with the brownfield R134a project remaining on track for FY27 commissioning. PL sees demand from semiconductors, electric vehicles, battery energy storage systems and clean-energy applications supporting near-term growth.

Fluoropolymers

Fluoropolymers revenue rose 14.5 per cent year on year and 7.8 per cent quarter on quarter to Rs9,140 million, aided by value-added products, higher core-product volumes and an improved product mix. Management guided for 15-20 per cent annual Fluoropolymers volume growth. Existing capacities are nearing optimal utilisation, and additional capex has been announced to serve rising demand.

Management identified semiconductors, data centres, green hydrogen and advanced industrial applications as new growth opportunities.

Bulk Chemicals

Bulk Chemicals revenue increased 10.8 per cent year on year to Rs1,640 million, primarily driven by price increases and improved realisations.

Battery Chemicals: Early-Stage Contribution

Battery Chemicals contributed Rs290 million of Q1FY27 revenue, although GFL EV EBITDA remained negative at Rs300 million. Management said LiPF6 qualification is almost complete and the product is entering its growth phase. PVDF is close to final qualification, with revenue expected after qualification.

Management is targeting three-digit battery-chemical revenue by Q4FY27 and identifies FY27 and FY28 as important growth years. PL remains more measured, stating that Battery Chemicals may take longer to make a material contribution to topline, with LiPF6 likely to be the key FY27 contributor.

Earnings Estimates and Outlook

Following the stronger outlook, PL raised its FY27E and FY28E estimates as follows:

Key Risks and Constraints

• Challenging global business environment.
• Supply-chain disruptions.
• Commodity-price volatility.
• Potentially slower-than-expected scaling of Battery Chemicals.