The shares of Gujarat Fluorochemicals Limited (GFL) were trading at ₹ 3001.00 apiece at 12:35 PM on Tuesday. The company’s share price has corrected by 15.58% in the past month, however, it has increased by 21.17% on a year-to-date (YTD) basis.
Brokerage and research firm ICICI Securities in its research report dated December 26, 2022, said that the stock trades at a reasonable P/E valuation which makes it the most affordable India fluorine player by valuations. The stock was trading at 2770 levels around the time when the report was published.
GFL is a part of the INOX group of companies and is one of the leading producers of fluoro-polymers, fluoro-specialities, chemicals and refrigerants in India.
“We believe the recent sharp stock price correction offers good entry point. We retain BUY rating on the stock with an unchanged target price of Rs 4,270 (30x FY24E EPS). It is among our top pick in specialty chemical sector,” ICICI Securities said. The target translates to an upside of 42.29% as compared to its current share price.
The brokerage added that within fluorine chemistry, it relatively prefers the fluoropolymers business as it is in a sweet spot to grow along with new-age industries such as batteries, solar panels and green hydrogen.
It said that integrated players are winning on reliability and the rise in cost for western peers. This is helping GFL to increase its margins. The company’s new fluoropolymers capacity expansion will immediately help in growing profits in FY23 and FY24. It is working on expanding its presence in battery chemicals.
GFL has done upfront investments in intermediate production (R-22 and R-142b), which has enabled the company to win more customers/contracts in the fluoropolymers business, the brokerage added.
GFL has a market capitalization of ₹ 33,177 crores. It has a good return on equity of 20.32% and an ideal debt-to-equity ratio of 0.35. However, its shares are trading at a price-to-equity ratio of 30.52, which is significantly higher than the industry average of 12.65, indicating that the stock is overvalued as compared to its peers.
Written by Simran Bafna
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