Target:₹4,270
CMP: ₹3,041.20
Gujarat Fluorochemicals’ stock price has corrected 21 per cent in the past one month, and 25 per cent in the past three months while fundamentals remain robust with opportunities expanding. The stock trades at reasonable P/E valuation of 19.5x FY24E and 13.2x FY24E EV/EBITDA – this makes it the most affordable India fluorine player by valuations.
It offers a strong net profit CAGR of 41 per cent over FY22-24E, and return ratios are healthy, post-tax ROCE at 21 per cent and ROE at 25.6 per cent in FY24E. Within fluorine chemistry, we relatively prefer fluoropolymers business, as it is in a sweet spot to grow along with new-age industries such as batteries, solar panels and green hydrogen.
Integrated players are winning on reliability, and rise in the cost for western peers is helping GFL expand margins. New fluoropolymers capacity expansion will immediately help in growing profits in FY23 and FY24; thereafter, the company is working on expanding presence in battery chemicals. 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 ₹4,270 (30x FY24E EPS). It is among our top pick in specialty chemical sector.