This specialty chemical stock down 12% in a month. Jefferies says ‘Buy’

NFIL with its technical expertise in fluorine, accelerated capex program, augmented capabilities to handle growth and strong balance sheet is well positioned to capture the growth opportunity in pharma/agrochem CDMO, in Jefferies’ view.

“c60% exposure to pharma in high value business makes it less exposed to the agrochem cycle. New product breakthroughs (like HPP) have disproportionate positive impact on growth given its smaller revenue base. Accelerating earnings growth and optionality from new product wins drive our Buy rating,” it said in a note. The brokerage has a buy rating on the specialty chemical stock with a target price of ₹3,840 per share.

Chinese fluorochem majors have witnessed revenue decline over CY18-20 while Indian players have witnessed strong growth suggesting market share shift to India as innovators look beyond China.

Jefferies stated that its interaction with innovators suggested they evaluate prospective partners on tech capability, quality and reliability of production process, cost, size, potential to scale and safety. To this, “we add balance sheet strength and good capital allocation. Navin Fluorine (NFIL) and SRF – with recognized expertise in fluorochemistry – tick most of the boxes, in our view.”

Jefferies added that SRF’s technical expertise in fluorine chemistry, widening portfolio of specialty chem molecules, aggressive capex with room to improve utilization in existing facilities and a strong balance sheet position it well for growth, in its view. It has a price target of ₹1,890 on SRF.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.