Shares of Navin Fluourine International jumped 2.3 per cent on Friday, after the company announced capex of ₹195 crore for setting up of multi-purpose plant (MPP), which is expected to commence production from H1-FY23
The stock closed at ₹2,620.85 on Friday on the BSE.
Most analysts welcomed the move, as they see the expansion creating opportunities for new products in the life science and crop science sectors in the specialty chemicals business.
The expansion is expected to be funded through internal accruals and debt.
Product portfolio
With this multi-purpose plant, the company will have capacity to manufacture five products, specifically in agro. Of the five products, three will be developed in-house and two with clients (according to their specifications). Navin has another seven products in the pipeline catering to pharma and agro sectors.
Management said the EBITDA margin would be higher than at present and the RoCE would be in a similar range. The expected payback period would be four years, with revenue of ₹260-280 crore at peak utilisation, said broking firm Anand Rathi.
Amarjeet Maurya - AVP - Mid Caps, Angel Broking, said: “We are positive on new development and it will be EPS accretive for the company going forward.”
Large capex undertaking for MPP ensures long-term earnings growth, said Emkay Global. “We raise our TP by 17 per cent to ₹2,742 as we move from target PE to target PEG methodology (forward PE/1-year prospective EPS growth)”. it added. Anand Rathi said, the expansion would help launch products of complex fluorinated chemistry and strengthening customer relations. "We upgrade our rating to Buy with a higher target of ₹3,000, valuing the stock at 34x FY23 EPS, earlier ₹2,500".
According to analysts, a delay in capex implementation and a pick-up in its legacy business are key risks.