Navin Fluorine’s Broad-Based Q1 FY27 Growth Supports CDMO and Capacity-Led Earnings

Investment View and Valuation

Motilal Oswal Financial Services Ltd. remains constructive on Navin Fluorine International’s diversified growth engines, supported by constructive HFC pricing, international exposure, order visibility and operating leverage from capacity ramp-ups. However, it reiterates its Neutral rating and sets a target price of Rs 8,300, compared with the report CMP of Rs 7,610.

The broker values the stock at 40 times FY28E EPS of Rs 207. The stock was trading at approximately 37 times FY28E EPS and 24 times FY28E EV/EBITDA.

Strong Q1 FY27 Financial Performance

NFIL reported broad-based growth in Q1 FY27, with revenue, EBITDA and adjusted PAT exceeding Motilal Oswal’s estimates. EBITDA margin expanded to 34.2 per cent from 28.5 per cent in Q1 FY26, supported by a favourable product mix and operating leverage. Gross margin, however, declined 60 basis points year on year to 57 per cent.

India and international revenue grew 50 per cent and 41 per cent year on year, respectively.

Broad-Based Segment Growth

All three key segments delivered strong year-on-year growth in Q1 FY27, supported by higher volumes, improved realisations, product scale-up and rising demand for existing molecules.

Capacity Expansion and Execution Milestones

Management has approved Rs 90 crore of capital expenditure for an advanced-materials facility at Surat, which is targeted for commissioning in Q2 FY28. The facility is intended to scale four to five customer-qualified products from laboratory to commercial production for the semiconductor, data-centre, electronics and defence industries. It will also support the development of an indigenous defence material in collaboration with DRDO.

NFIL has initiated Rs 130 crore of phase-two cGMP4 capital expenditure in CDMO, funded through internal accruals. Operationalisation is expected in Q4 FY27. Management is targeting three-times asset turnover by FY29, while expanding into API minus-one-stage manufacturing and progressing an early-phase molecule for a key customer.

Other execution milestones include the following:

• The 15,000 MTPA R32 expansion is expected to be operational by Q3 FY27.
• MPP debottlenecking at the Dahej specialty-chemicals plant is expected to be completed by Q3 FY27.
• The Chemours advanced-materials project is expected to be operational by Q2 FY27.
• NFIL plans to pitch four to five new Specialty Chemicals molecules in FY27, including three patented molecules.

Earnings Outlook

Motilal Oswal expects revenue, EBITDA and adjusted PAT compound annual growth rates of 26 per cent, 25 per cent and 26 per cent, respectively, over FY26 to FY28. Following the strong quarter and improved EBITDA-margin guidance, the broker raised its FY27 and FY28 earnings estimates by 10 per cent and 13 per cent, respectively.

The broker remains positive on NFIL’s capacity-led growth prospects, CDMO momentum, international business and operating leverage, while retaining its Neutral rating and Rs 8,300 target price.