Value Stock To Buy For The Year-End 2022, To Reap Good Returns In 2023

Brokerage firm Anand Rathi has suggested buying the stock of Gujarat Fluorochemicals Limited for a decent upside. The brokerage has set a good upside target on the stock of Rs 3910. Let's take a look at why Anand Rathi has a buy on the stock.

Good growth in revenue

According to Anand Rathi, Gujarat Fluorochemicals reported a growth of 51.6% in its revenues at Rs 14,613 million in Q2-FY23 as against Rs 9,640 million in Q2-FY22. The growth was mainly driven by strong performance in Refrigerant business (190% growth), Chlor-Alkali business (85% growth), Value Added business (84% growth) followed by 23% growth in PTFE business and a de-growth of 34% in CMS business.

"On the profitability front, the company has reported operating margins of 35.2% at Rs 5,139 million in Q2-FY23 as against 30.1% at Rs 2,904 million in Q2-FY22, an increase of 500 basis points. The increase in margins was due to better overall performance led by both volume and realisation growth. The company's profit after tax (PAT) margins for the quarter stood 24.5% at Rs 3,582 million as against 21.4% at Rs 2,059 million in Q2-FY22," the brokerage has said.

Capacity expansion

According to brokerage firm, Anand Rathi on value added products, Gujarat Fluorochemicals has commissioned additional capacities for FKM, PVDF and PFA during the quarter and are under stabilizing process with sales expected to ramp up from Q3FY23 onwards. During the quarter, newer grades contribution has resulted into expansion of volumes for all the fluoropolymers. The company's Specialty chemicals business also posted strong growth in revenues. The company's proposed commissioning of its new plant has spilled over to Q3-FY23 and it expects to commission and gradually ramp up manufacturing from QFY23 onwards.

New Fluoropolymers and Specialty Chemicals

According to Anand Rathi, going ahead, the company is in process of augmenting existing as well as adding new capacities in new Fluoropolymers and Specialty Chemicals which are in process of commissioning. "The same are expected to reach full utilization in the next few quarters. The company intends to spend about Rs 12,500 million in current financial year and similar amount in FY24 on capex towards expanding its capacities for chemicals for backward integration, Fluoropolymers and New Age Products," the brokerage has said.

Price target of Rs 3910 on the stock

Anand Rathi has set a price target of Rs 3910 on the stock. "We believe Gujarat Fluorochemicals has created a niche for itself in its fluoro-chemicals business and is better poised to explore markets for more value added products including in sunrise sectors like electric vehicles while continue to gain from its backwards integrated and diversified businesses. Also, the company is significantly reducing its debt and strengthening its balance sheet aiding long term growth. We continue to remain positive on the stock and re-initiate BUY rating on the stock with a target price of Rs 3,910 per share," the brokerage has said. The stock of Gujarat Flourochemicals was last trading at Rs 3223.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article.