Navin Fluorine, SRF: What makes these stocks top bets from chemical space?

The rising share of fluorine in drugs and pesticides is opening up huge opportunities for chemical stocks such as Navin Fluorine, SRF, says HDFC Securities Institutional Research. It says in order to tap these, capital allocation is skewed towards setting up speciality fluorochemical capacities.  

Navin Fluorine International (NFIL), SRF, and Gujarat Fluorochemical (GFL) have developed competencies in fluorine chemistry over decades, it says.  

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"Specialisation in fluorination together with expertise in synthesis at all scales will allow NFIL and SRF to take advantage of opportunities emanating from pharma and agrochemical industry," says the research

Based on the opportunities for these stocks, HDFC Securitas has recommended a 'buy' for Navin Fluorine International (NFIL) and suggested to 'add' SRF. The two companies have also signed a long-term contract to supply intermediates to pharma/agrochemical.

Navin Fluorine International (NFIL) | Target Price: Rs 4905

Upgrading NFIL to 'Buy', the brokerage has set a target price of Rs 4905 for this share, which turns out to be an upside of 29% on Thursday's closing price of Rs 3802.65. It is of the view that capacity expansion and long-term contracts are likely to fuel growth in this counter. "Besides, NFIL has a wholly-owned subsidiary based out of UK, Manchester Organics (MOL), which is a world leader in fluorination and high-pressure chemistry, research, and manufacturing. The MOL has a catalogue of over 50,000 compounds catering to global clients," highlighted HDFC Securities before upgrading the stock to buy.  

SRF Limited | Target Price: Rs 2675
Maintaining 'add' rating, HDFC Securities sees the stock touching a target price of Rs 2675 in one year. This translates into an upside of 14% on Thursday's closing price of Rs 2343.45.  

"SRF's chemicals business has delivered a robust performance with 17% revenue CAGR over FY11-21. Also, revenue contribution from the segment grew steadily from 21% in FY11 to 43% in FY21. Chemical business' momentum remains strong too making it a good bet from chemical space," the brokerage said.  

Besides, recovery was also seen in the technical textiles business. "SRF is the largest manufacturer of nylon tyrecord fabrics (NTCF) in India and the second-largest in the world. It is the second-largest manufacturer of conveyor belting fabrics in the world. This business segment has significant exposure to the tyre industry," said HDFC securities.

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