India is the 6th largest global chemical producer and 3rd in Asia, contributing 7% to its GDP. The Indian chemical industry, valued at $220 billion, is expected to reach $300 billion by 2030 and $1 trillion by 2040. India ranks 14th in chemical exports and 8th in imports.
The fluoropolymer industry is a high-performance plastics market that is growing due to the demand for its chemical, thermal, and electrical properties. Fluoropolymers are used in many industries, including automotive, aerospace, and medical.
Price Action
The shares of Gujarat Fluorochemicals Ltd, with a total market capitalization of Rs 40,512.68 Crores on Tuesday, closed at Rs 3,688 per share which was 1.8 percent down from its previous closing price of Rs 3,754.35. The shares are currently trading at a discount of 24.4 percent from its 52 week high of Rs 4,880.95 per share.
The shares of Gujarat Fluorochemicals Ltd generated a three year return of 47 percent and a stellar 576.5 percent return in the past five years.
Capex Plans
The company is committed to a cumulative capex of Rs 6,000 Crores by FY28. The business is expected to achieve around 2x asset turnover and approximately 25 percent EBITDA margins. The company is well-positioned to capitalize on the opportunities across all segments.
R-32 Capacity Expansion
R-32, also known as difluoromethane, is a refrigerant used in air conditioners and heat pumps. The company has a planned capacity of 30,000 tons for R-32, with the first phase expected by Q4FY26. The Initial investment will be Rs 150 crores for R-32 capacity expansion. The rationale for the investment is supported by improved pricing and demand-supply dynamics.
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Management Outlook
Management is optimistic about growth in fluoropolymers and battery materials. They are confident in meeting capex goals despite potential U.S. policy changes affecting EV incentives. Their continuous engagement with customers indicates sustained demand and investment plans.
Delhi government is exploring to transition all the last-mile delivery logistics away from fossil fuels to EV by 2027. The management believes that these developments will support the growth in demand for EV. The company’s EV segment has the first-mover advantage, as a non-Chinese global supplier in the battery materials space.
Target Price
ICICI Securities Ltd has maintained a “Buy” rating on Gujarat Fluorochemicals Ltd’s stock with a target price of Rs 4,160 with implied valuation of 38.5x FY27E EPS.
About Gujarat Fluorochemicals Ltd
Gujarat Fluorochemicals Ltd a part of INOXGFL Group, is a leading Indian Chemicals Company. Their Business segment is chemicals, which includes bulk chemicals, fluoro chemicals, and fluoropolymers. The company is engaged in the manufacturing and trading of refrigerant gases, caustic soda, chloromethane, fluoromonomers, specialty chemicals, etc.
Financials
The Company reported a Revenue from Operations growth of 16 percent YoY from Rs 992 Crores in Q3FY24 to Rs 1,148 Crores in Q3FY25. Their Net Profits jumped 58 percent YoY from Rs 80 Crores to Rs 126 Crores over the same period. On the Operating level, their EBITDA increased by 41 percent YoY from Rs 219 Crores to Rs 308 Crores. The EBITDA margin for the quarter stood at 26 percent, up from 21 percent in Q3FY’24.
Overall improvement in financial was largely driven by a sustained improvement in the fluoropolymers vertical and better product mix driving higher margins. High capex in the Battery Materials business continues to impact profitability due to increased depreciation and interest charges.
Written By Adhvaitha Nayani
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