Navin Fluorine shares under pressure after specialty chemical maker disappoints Street with weak Q2 results

Navin Fluorine International (NAVINFLUOR) shares faced selling pressure on Wednesday after the specialty chemicals manufacturer reported a weak set of financial results. The stock of the Mumbai-based company declined by as much as Rs 64.2, or 1.9 per cent, to Rs 3,374 apiece during the session on BSE. 

Navin Fluorine International Q2 results highlights

After market hours on Tuesday, Navin Fluorine reported a 4.7 per cent year-on-year increase in consolidated net profit to Rs 60.5 crore for the July-September period.

Its revenue grew 12.6 per cent to Rs 472 crore for the second quarter of the current financial year, according to a regulatory filing. 

The specialty chemicals company's earnings before interest, taxes, depreciation and amortisation (EBTIDA) stood at Rs 99 crore for the quarter under review, as against Rs 94 crore for the corresponding period a year ago. 

Its margin, a key measure of profitability, shrank by 140 basis points (bps) on a year-on-year basis to 20.9 per cent for the September quarter. 

The company missed Street forecasts on all fronts. Zee Business analysts had pegged Navin Fluorine's quarterly net profit at Rs 75 crore, revenue at Rs 515 crore and margin at 24.7 per cent. 

Revenue from specialty chemicals grew 4.6 per cent and that from high-performance products increased 24 per cent, according to the filing. 

The company's board declared a total dividend of Rs 7 per share with a record date of November 10, comprising an interim dividend of Rs 5 per share and a special dividend of Rs 3 per share. 

What analysts make of Navin Fluorine Q2 earnings

Analysts remain divided on Navin Flourine shares after the Mumbai-based company's subdued earnings. 

Jefferies maintained its 'hold' rating on Navin Fluorine shares and reduced its price target by Rs 460, or 12.7 per cent, to Rs 3,165 apiece for the stock after the earnings announcement.

The brokerage's target implies a discount of 7.9 per cent in the stock from the previous close. 

IDBI Capital Markets maintained a 'buy' rating on Navin Fluorine with a price target of Rs 4,625 after the earnings announcement. Analysts at IDBI Capital wrote, in a research report, that the specialty chemicals maker's revenue was impacted by a slower stabilisation of its R32 plant, the progressive ramping up of its high performance products plant at Dahej, and the deferral of sales in its contract development and manufacturing organisation (CDMO) unit and two new specialty products, but also highlighted that its management is confident of recouping the revenue in the subsequent quarters. 

"With growth visibility in mind, Navin is poised to sustain its capex momentum beyond FY23 by prioritising the enhancement of its capabilities through deep R&D prowess and prudent capital allocation. Rich fluorination capabilities and robust capex provide a long growth runway. Succession planning for the outgoing CEO will be a key monitorable," IDBI Capital Markets said.  

In September, Navin Fluorine said managing director Radhesh Ratnakar Welling had resigned. Welling will be relieved from the service from the close of business hours on December 15, 2023, and will continue to serve the company to facilitate a smooth transition, Navin Fluorine said.

"Although FY24 is expected to be a year of consolidation, we remain sanguine on NFIL’s growth prospects owing to its deep fluorination expertise, well entrenched client relationships and high quality long term contracts," added the brokerage, whose target implies a 34.5 per cent upside in the specialty chemicals stock from the previous close. 

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