This specialty chemical stock’s correction an opportunity to Buy, says JM Fin
Over the last 3 months, Navin Fluorine shares have corrected around around 12-13% partly on account of global demand slowdown concerns and partly due to one-off other expenses in Q2 FY23, highlighted domestic brokerage and research firm JM Financial.
In the brokerage house’s view, this correction provides an opportunity to Buy the specialty chemical stock, as it believes that the market is overlooking strong earnings growth of around 39% over FY22-25E.
Further, there is a potential of Navin Fluorine winning an additional contract from Honeywell for HFOs, possibility of scale-up of its molecules under its CDMO business, and new product additions in its specialty chemicals business.
Hence, JM Financial has maintained its Buy rating on Navin Fluorine shares with an unchanged September 2023 target price of ₹5,090 apiece on account of long-term growth visibility from its multi-year contracts in HFOs and specialty chemicals along with the strong outlook for its CRAMS business.
“Navin fluorine continues to be our top pick in the mid-cap specialty chemical companies space. Within the specialty chemicals companies under our coverage, Navin Fluorine has the highest EPS growth at 39% over FY22-25E. Our FY24/25 EPS estimates are around 6-7% higher than consensus estimates as we bake in higher operational benefits. We believe the recent ~12-13% correction in the stock provides an opportunity to BUY,” said the brokerage.
It believes that Navin’s multi-year agreements for HFO and specialty chemicals provide long-term visibility amid robust outlook for its Contract Research and Manufacturing Services (CRAMS) business.
“Navin Fluorine continues to remain our top pick in midcap specialty chemical companies. Key risks: a) delay in rampup of upcoming capacities of HFO and specialty chemicals; and b) issues in launch of phaseI/II drugs made using Navin’s CRAMS molecules,” it added.
On a consolidated basis, Navin Fluorine reported 9% fall in its net profit to ₹57.8 crore during the second quarter (Q2 FY23) as compared to ₹63 crore in the year ago quarter. Meanwhile, its net revenue from operations came at ₹419 crore compared to ₹339 crore, representing a year-on-year (YoY) growth of 24%.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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