Target: ₹5,090

CMP: ₹4,252.05

Over the last three months, Navin Fluorine’s stock has corrected around 12-13 per cent partly on account of global demand slowdown concerns and partly due to one-off other expenses in Q2-FY23.

In our view, this correction provides an opportunity to ‘buy’ the stock, as we believe that the market is overlooking strong earnings growth of about 39 per cent over FY22-25, potential of Navin Fluorine winning an additional contract from Honeywell for hydrofluoroolefins (HFOs), possibility of scale-up of its molecules under its Contract Development and Manufacturing Organisation (CDMO) business, and new product additions in its specialty chemicals business.

Hence, we maintain Buy with an unchanged September 2023 target price of ₹5,090/share (based on 40x September 2024 EPS) on account of long-term growth visibility from its multi-year contracts in HFOs and specialty chemicals along with the strong outlook for its Contract Research and Manufacturing Services business.

We believe Navin Fluorine could potentially win an additional volume contract for HFOs post the successful ramp-up of its current supply contract, driven by the Montreal Protocol. In our opinion, any slowdown in offtake by Honeywell on account of demand slowdown could be compensated in the coming quarters. Besides this, in our view, Navin could also bag additional contracts in specialty chemicals.

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