Navin Fluorine International Ltd’s stock has delivered almost 60% returns over the last one year. On 10 February, the shares hit an all-time high of ₹6,965 apiece and are now trading around 7% lower. This comes at a time when the broader market returns have been lacklustre.
Part of Navin Fluorine’s recent outperformance is led by positive sentiment over the India-UK FTA and India-US trade deals. The company’s recent performance shows improving growth, expanding margins and brighter earnings visibility.
In a recent meeting with analysts, the management discussed R32, contract development and manufacturing for global pharma and innovators (CDMO), and the recent capex plans. Analysts are pleased.
“Based on our interaction with the management, the company appears well-positioned for a strong multi-year growth trajectory, supported by a robust CDMO pipeline, expansion of key refrigerant gas capacities, and sustained momentum in the agrochemicals segment,” said a PL Capital report dated 19 February.
Navin Fluorine operates in three business segments: HPP (refrigerant gases and fluorochemicals), specialty chemicals and CDMO. All three businesses clocked strong revenue growth in the December quarter (Q3FY26).
Which segment led incremental growth? Around three-fifths of incremental Q3 revenue was driven by CDMO and specialty chemicals, driven by new molecules scaling up and strong export orders.
The company’s consolidated Q3 revenue grew 47% year-on-year to ₹892 crore, indicating the revenue mix is shifting towards higher value-added, higher-margin businesses. This mix shift is already visible in profitability, with EBITDA margin expanding as much as 1,000 basis points to around 35% from 24% in Q3FY25.
Going ahead, revenue growth has three levers: scaling up CDMO, strong export-led growth in specialty chemicals and steady volume growth in HPP aided by healthy demand for refrigerant gases.
The CDMO business, particularly, is emerging as a long-term growth engine. The management is targeting around $100 million of CDMO revenue by FY28 and a further scale-up to $200 million by FY30, supported by multiple molecules in late and commercial stages and multi-year contracts with global pharma customers.
In the CDMO business, it is usually difficult for an onboarded pharma customer to change vendors. This creates sticky relationships and structurally higher margins.
As CDMO and specialty chemicals form a larger share of total revenues, consolidated EBITDA margin is expected to remain higher than the past levels and can sustain at around 30%+ over the medium term, even as new capacities ramp up.
Key capex projects include a 15 ktpa R32 capacity expansion targeted for commissioning in Q3FY27; debottlenecking of MPP capacity for specialty chemicals by Q3FY27; and the advanced materials/Chemours project targeted for Q1FY27.
These capabilities translate into meaningful revenue potential over the next few years. The R32 expansion alone has a peak annual revenue potential of ₹600- ₹825 crore, MPP debottlenecking can add about ₹140- ₹160 crore of incremental revenue, and CDMO and advanced materials offer large optional upside as utilization ramps up.
Investors seem to be capturing a good share of the optimism in the current valuations. The stock trades at 44 times estimated earnings for FY27, based on Bloomberg consensus.
In a report on 10 February, Axis Securities analysts said a majority of the near-term positives are already priced in. It has downgraded the recommendation on the stock to ‘hold’ from ‘buy’ with a revised target price of ₹6,950 per share versus ₹5,930 earlier.
“Despite strong fundamentals, the valuation remains demanding at current levels, limiting further upside in the near term,” said Axis.
