Gujarat Fluorochemicals Vs Navin Fluorine: Many chemical companies gave multi-bagger returns recently making their investors richer and promoters multi-millionaire. As the rally has plateaued, does it make sense to buy a chemical stock? If yes, then which sub-sector.

In this article, we’ll perform a comparative analysis of two companies in the fluorochemicals space: Gujarat Fluorochemicals vs Navin Fluorine International and see if they can be good bets for the coming quarters.

Gujarat Fluorochemicals Vs Navin Fluorine

We’ll start off our comparative analysis by getting ourselves acquainted with the fluorine industry landscape. Next, we’ll learn about the two businesses. Next, we’ll race through the financials of both stocks. A highlight of the future plans of both the companies and a summary conclude the article at the end.

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Industry Overview

Fluorochemicals are fluorine-based chemicals which form stable compounds. Because of their different properties, fluorochemicals (or fluorine) are used in a variety of industries such as refrigeration, dyeing, automotive, pharmaceuticals, agrochemicals, textiles,  electricals & electronics and more. 

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Overall, the fluorochemicals industry is projected to increase at a CAGR of 5.2% over the next few years to reach $ 25.1 billion in value by 2026. Meanwhile, multiple sub-segments such as fluoro-elastomer and fluorocarbons are expected to expand at a much sharper pace.

Going forward, key factors such as rising disposable income, increasing urbanization, changing lifestyle, etc. will be growth drivers for the agrochemicals, textile, electronics, pharma and automobile industry. These are a few industries in which fluorine usage has become prevalent. 

Business Overview

In the previous section, we learnt about the fluorochemicals industry landscape in India. Now, we’ll learn about the similarities and differences between their businesses for our Gujarat Fluorochemicals Vs Navin Fluorine study.

Gujarat Fluorochemicals

Part of the InoxGFL Group, Gujarat Fluorochemicals Ltd. (GFL) started as a refrigerants manufacturer in 1987. Over the years, it has grown into India’s leading chemicals company.

The company manufactures caustic soda, chloroform, refrigerants and HF & TFE based fluorochemicals among other products which find their uses in textiles, detergents, foam, resins, plastics, agrochemicals, air conditioners and other products.

In addition to its fluoro specialities and bulk chemicals divisions, it also has a third segment for fluoropolymers. These properties and performance chemicals have a broad range of applications from cookware to printing ink to aviation.   

Gujarat Fluoro has three production sites in India, one Fluorspar mine in Morocco and multiple offices & warehouses in Europe and the USA.

Fluoro specialities and fluoropolymers are particularly larger divisions for GFL contributing 33% and 50% of the total Q4FY23 revenue respectively. The balance 17% came from the bulk chemicals segment.

Navin Fluorine International

Founded in 1967, Navin Fluorine International Ltd. (NFIL) is a leading speciality fluorochemicals manufacturer in India. It is a flagship company of Padmanabh Mafatlal and is engaged in the manufacturing of fluorine-based speciality chemicals, refrigerants, and inorganic chemicals. 

Additionally, it also has a contract development and manufacturing organisation (CDMO) business unit for custom syntheses of fluorinated compounds for agrochemicals, pharma and speciality chemicals companies.

Its products find downstream applications in life science, crop science, petrochemicals, air conditioning, and stainless steel companies. It owns three production facilities and is one of the largest producers of BF3 gas in the world and inorganic fluorides in India.

NFIL has three business segments: speciality chemicals, inorganic fluorides & refrigerants (HPP), and CDMO. The contribution of the three divisions stood at 36%, 43%, and 21% in the total revenue for FY23 respectively.

We got a good understanding of both the companies of our Gujarat Fluorochemicals Vs Navin Fluorine analysis. Let us see how they have performed in the past.

Gujarat Fluorochemicals Vs Navin Fluorine – Financial Comparison

Gujarat Fluorochemicals Vs Navin Fluorine – Revenue Growth

Gujarat Fluoro is 2.7 times larger than Navin Fluorine in terms of income. Overall,  both companies have exhibited impressive growth. The top line of Gujarat Fluorochemicals and Navin Fluorine International grew at a similar CAGR of 15.8% each over the past few years. 

The table below highlights the increasing revenue of Gujarat Fluorochemicals and Navin Fluorine over the past five years.

Financial YearGujarat FluorochemicalsNavin Fluorine
20235,6852,077
20223,9541,453
20212,6501,179
20202,6061,062
20192,729996
(figures in Rs Cr)

Gujarat Fluorochemicals Vs Navin Fluorine – Net Profit Growth

As the topline grew, so did the bottom line of the fluorine stocks. However, the figures of Gujarat Fluorochemicals are not comparable historically because of exception tax treatment in base year FY19. The company was restructured in the past with the chemicals business getting demerged and subsequently listed as Gujarat Fluorochemicals.

The table below showcases the growing net profits of Gujarat Fluorochemicals and Navin Fluorine over the past five fiscals.

Financial YearGujarat FluorochemicalsNavin Fluorine
20231,323375
2022775263
2021-222247
2020189409
20191,246150
(figures in Rs Cr)

Gujarat Fluorochemicals Vs Navin Fluorine – Profit Margins

The profit margins of the two chemicals makers have significantly improved over the years. The first reason is the change in the product mix to high-margin products from commodity chemicals. Secondly, chemical prices further improved because of the China+1 strategy adopted by businesses globally and the crackdown of the Chinese government on the companies to control pollution.

The table below presents the operating profit margins of Gujarat Fluorochemicals and Navin Fluorine over the last five financial years.

Fiscal YearGujarat FluorochemicalsNavin Fluorine
20233325
20222824
20212229
20201824
20192623
(figures in %)

Along these lines, the net profit margin also expanded. However, the figures are not comparable historically for both companies because of exceptional tax treatments in different years.

The table below presents the net profit margins of Gujarat Fluorochemicals and Navin Fluorine over the last five financial years.

Fiscal YearGujarat FluorochemicalsNavin Fluorine
20232318
20222018
2021-821
2020738
20194615
(figures in %)

Nevertheless, it is visible that Gujarat Fluorochemicals is a higher margin company than Navin Fluorine because of the underlying difference in business. 

Gujarat Fluorochemicals Vs Navin Fluorine – Return on Equity

Moving on to the profitability analysis, a higher profit margin of Gujarat Fluorochemicals translates into a higher return on equity (RoE) for the company. The RoE of Gujarat Fluoro and NFIL stood at 24.1% and 17.2% for FY23 respectively. 

The figures below represent the return on equity (RoE) ratios of Gujarat Fluorochemicals and Navin Fluorine for the last few financial years.

Fiscal YearGujarat FluorochemicalsNavin Fluorine
202324.117.2
202218.514.3
2021-6.315.8
20205.328.9
201935.613.9
(figures in %)

Gujarat Fluorochemicals Vs Navin Fluorine – Debt Analysis

Both companies look fundamentally strong with low debt-to-equity (D/E)  ratios and high-interest coverage (ICR) ratios. The D/E ratio of Gujarat Fluorochemicals and Navin Fluorine stood at 0.27 and 0.39 respectively. Additionally, the ICR was computed to be 18.30 times and 21.30 times for the FY23 period. 

What’s more? NFIL has been debt free for a number of years. Its D/E ratio increased in the recent fiscal as it acquired long-term borrowings to the tune of Rs 653 crore to fund its CAPEX. During the same period, the D/E ratio of Gujarat Fluoro improved from 0.36 to 0.27.

Gujarat Fluorochemicals Vs Navin Fluorine – Future Plans

So far we looked at the previous fiscals data for our comparative study of Gujarat Fluorochemicals Vs Navin Fluorine. In this section, we’ll try to get some sense of what lies ahead for the companies and their investors.

Gujarat Fluorochemicals

  1. The management of Gujarat Fluoro is particularly bullish on its high-margin fluoropolymers vertical as  its products find applications in some of the fast-growing industries like a clean environment, 5G, EV batteries, IoT, hydrogen cells, solar panels, and semiconductors. 
  2. The chemicals maker is planning to set up an integrated battery chemicals facility which shall demand a large CAPEX in the coming quarters. 
  3. Its solar films project is expected to begin in the next fiscal year. It will fulfil international and domestic demand both. 
  4. The company did a capital expenditure of Rs 1,349 crore in FY23 and has earmarked a larger sum of Rs 1,500 crore for the FY24 period.

Navin Fluorine International

  1. NFIL commenced production of its three plants during FY23 laying down the path for higher sales in the future.
  2. Furthermore, the management announced a capital expenditure of Rs 450 aimed towards establishing a new 40,000 TPA HF capacity at its production facility in Dahej.

Gujarat Fluorochemicals Vs Navin Fluorine – Key Metrics

We are almost at the end of our comparative study of Gujarat Fluorochemicals Vs Navin Fluorine International. Let us take a look at some key metrics of the stock other than the ones covered above.

ParticularsGujarat FluorochemicalsNavin Fluorine
CMP₹3,300₹4,550
Market Cap (Cr.)₹36,400₹22,500
EPS₹121.0075.7
Stock P/E2860
RoE24.117.2
Book Value₹503₹441
Price to Book Value6.5710.3
Promoter Holding64%29%

Conclusion

We learnt from our comparative study of Gujarat Fluorochemicals Vs Navin Fluorine International above that the former is a high margin, high RoE company which presently trades at a lower P/E than that of NFIL. This is despite the fact that it has announced plentiful investments for its fluoropolymers division.

 In your opinion, which is the better of the two stocks? What can investors expect from both companies in the future? How about we continue this conversation in the comments below?

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