Navin Fluorine: What Should Investors Do?
Navin Fluorine continues to gain strength but valuations hover at the higher range. A new suite of projects is ready to commercialise and ramp up production in the next few years sustaining growth in its three segments and expand margins further. We had recommended that investors accumulate the stock, in the midst of the CEO shuffle in November 2023. The new management is settled in and has sustained the transformation pace. The stock returned 20 per cent after the call and currently trades at 47 times one-year forward earnings. We recommend the existing investors hold the stock, given the earnings growth potential. Fresh positions can be avoided at current valuations.
Speciality segment
The segment, manufacturing intermediates for agro and pharmaceutical clients, reported 6 per cent revenue decline in FY25, in line with the speciality chemical industry, which has been impacted by excess Chinese production. The company has circumvented the industry headwinds by securing a firm order-base to secure growth in FY26 and beyond.
In Q3-FY25, Navin Fluorine commercialised a facility for agro speciality compounds, built at a cost of ₹540 crore. The advanced intermediary production facility will be slow to ramp up, with an expected 0.5x asset utilisation by FY26. This compared with ₹800-crore segment revenues in FY25 should imply a mid-teens growth on a conservative basis in FY26.
The firm order flow will consist of expanded old order-book and new orders secured, as per the management. The company has announced two new fluorine-based advanced intermediates in Q4-FY25 results that will ramp up in FY26. It has reported a quarter-on-quarter growth of 17 per cent in Q4-FY25 (0.8 per cent year on year) for the segment indicating a strong momentum into the new fiscal.
By Q2-FY26, the company is also planning to commercialise a ₹450-crore facility for AHF (anhydrous hydrogen fluoride), a starting material for its fluorine products production. The project will include a portion (20-25 per cent) for external sales as well. The company has tied up with Switzerland-based Buss Chemtech for solar and electronic-grade HF (hydrofluoric acid) that aligns with the AHF plant opening in the near term.
With firm orders and new plants, Navin Fluorine’s speciality segment can outperform industry growth, which continues to face slower demand ramp-up.
CDMO, HPP segments
The CDMO (contract development and manufacturing outsourcing) division reported 31 per cent year-on-year growth in FY25. The segment has built a portfolio of 35-50 pharmaceutical projects, which are in early to late stage of development. The company intends to maintain 65 per cent late-stage projects to allow commercialisation revenues to flow (if a late-stage development gets FDA approval, it is commercialised and provides high volumes). One from a US major and two from Europe are at such levels providing visibility into FY26. Another large project is an agreement with Fermion (a Finland-based pharma company) for a non-fluoro patented product launch. The company expects $100 million revenues from CDMO segment by FY27 and this project is expected to account for a third of that revenue base.
Overall, the segment is building critical mass in CDMO and commercial orders will secure the financial base to expand the division further. On the capex front, a ₹160-crore Phase-I development of a cGMP-4 (current good manufacturing practices) facility is on track for commercialisation in H2-FY26.
The HPP (high performance products) division has operated at optimal capacity and benefitted from the recovery in demand and prices of refrigerant gases, R32 and R22. The company recently commercialised a ₹84-crore project expanding the capacity of R32 on the existing base. The anchor project of the segment — dedicated manufacturing for Honeywell, is progressing well with an expectation of expansion in the scope of demand.
Navin Fluorine has also signed an agreement with Chemours to produce their proprietary advanced materials Opteon, which is used as an immersion cooling fluid for data centres. The company will build a $14-million facility at Surat, with $5 million provided by Chemours; it is expected to be operational by FY27.
Financials, valuation
The company reported revenue growth of 14 per cent year on year in FY25 and is inching closer to its aspiration of 25 per cent EBITDA margins with 23 per cent reported in the year. The gradually-increasing utilisation of capex projects across speciality, CDMO and HPP, and the order-book will support growth. The company’s shift to a largely value-added portfolio should allow it to expand margins as well. Its net debt to EBITDA stands at a reasonable 2.6 times, while debt/equity is at 0.37 times as of March 2025. The debt will be serviced by the strong cash flow generation.
The company is trading at 47 times one-year forward, which is a 5 per cent premium to the past five-year average. It has traded at a premium owing to value-added portfolio and strong client base. This limits the headroom for the stock despite strong earnings growth visibility, making the risk-reward balanced at current juncture.
Published on May 17, 2025
