Gujarat Fluorochemicals - Fluoropolymers Business Is In A Sweet Spot: ICICI Securities

ICICI Securities Report

Gujarat Fluorochemicals Ltd.’s stock price has corrected 21% in the past one-month, and 25% in the past three months while fundamentals remain robust with opportunities expanding.

The stock trades at reasonable price/earning valuation of 19.5 times FY24E and 13.2 times FY24E enterprise /Ebitda – this makes it the most affordable India fluorine player by valuations.

It offers a strong net profit compound annual growth rate of 41% over FY22-24E, and return ratios are healthy, post-tax return on capital employed at 21% and return on equity at 25.6% in FY24E.

Within fluorine chemistry, we relatively prefer fluoropolymers business as it is in a sweet spot to grow along with new-age industries such as batteries, solar panels and green hydrogen.

Integrated players are winning on reliability, and rise in the cost for western peers is helping Gujarat Fluorochemicals expand margins. New fluoropolymers capacity expansion will immediately help in growing profits in FY23 and FY24; thereafter, the company is working on expanding presence in battery chemicals.

We believe the recent sharp stock price correction offers good entry point.

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