Multibagger Chemicals Stock Giving 200% Dividend, ICICI Securities Upgrades Target Price: Says Buy

Stock To Buy: Target Price

The Current Market Price (CMP) of Gujarat Fluorochemicals is Rs. 3,697. ICICI Securities has estimated a Target Price for the stock at Rs. 4,270. This stock has the potential to give a 15.49% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 39,937 crore.

Financials and stock performance

The company's net revenue in FY22 has recorded at Rs. 39.5 bn, which is expected to reach Rs. 53 bn in FY23. Their net income in FY22 stood at Rs. 7.9 bn, which is expected to be at Rs. 12.6 bn in FY23. It is a top multibagger chemicals stock as its share price surged by 404.59% in the last 5 years. Additionally, in the past 6 months, this bluechip company's stock price has gained by around 30%.

Robust Capex plan

The company expects to invest ~Rs. 25bn over the next two years, and another Rs. 40bn-60bn during FY25-FY27. GFL in its earning presentation disclosed capex of Rs. 11.5bn for FY23, but it expects some frontloading of capex for fluoropolymers during the year, and so capex can jump to Rs. 15bn. FY24 capex also includes investment into the aforementioned integrated battery chemicals plant.

Stock Advantages: ICICI Securities

Upgrading the stock's target price, ICICI Securities stated, "GFL is well placed to increase its revenues on the back of its significant exposure to new-age industries of battery, solar and green hydrogen. It aspires to double the revenue in the next three years and maintain EBITDA margin at 30-35% at least. We have increased EPS estimates by 2-10% over FY23E-24E and also raised our target price to Rs. 4,270 (30x FY24E EPS, unchanged)." However, slower than expected ramp-up in capacity utilization is a key risk.

Rising opportunity in fluoro-polymers

The company is optimistic about the rising opportunity in fluoro-polymers and battery chemicals over the next 5-10 years. It plans to expand capacity by 7x in FKM, 4x in PVDF, and 4x in PFA over the next two years, which will significantly drive revenue growth in new fluoropolymers. These are high-value products on which realizations currently are at US$25-40/kg, and EBITDA margins are higher than the company average. Post FY25, GFL expects significant opportunities from battery chemicals for which it is planning to commercialize the first plant in the next 2 quarters.

Strong revenue growth in PTFE

In FY22, the company's polytetrafluoroethylene (PTFE) revenue grew 60.9% YoY to Rs. 13.3bn, which was helped by higher volumes and better realizations. The total global demand for PTFE is 175ktpa, and GFL's share will be 12-13%. It started with 2-3 grades a decade ago, and has now scaled to over 50 grades. 85% of the PTFE sold by GFL is in the value-added grades where Chinese presence is limited.

Company Portfolio:

Gujarat Fluorochemicals Limited (GFL) is an Indian Chemicals Company with over 30 years of expertise in Fluorine Chemistry. GFL holds domain expertise in Fluoropolymers, Fluorospecialities, Refrigerants and Chemicals, catering to the material requirements of the modern world. With three manufacturing facilities in India, a captive Fluorspar mine in Morrocco, offices and warehouses in Europe and USA, and a marketing network spread across the world, GFL is one of the established players in Fluoropolymers and Fluorospecialities markets.

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.