Rs 8/ Share Dividends: Midcap Chemical Stock Recommended As Buy For Target Price Over Rs 4,000

Chemical stock in midcap basket, Navin Fluorine International has just turned ex-dividend this week for its interim dividend payout of a whopping 250% interim dividend along with a 150% special dividend for FY24. The midcap which currently trades near Rs 3,600 levels, has a potential upside of over 11% ahead with a target price crossing Rs 4,000. The majority of brokerages have trimmed their estimates for Navin shares, nevertheless, from the current price level, the stock can fetch near-term gains.

Navin Fluorine turned ex-dividend on November 10 which was also the record date to determine eligible shareholders for the interim dividends. As per the regulatory filing, the company will have an interim dividend of Rs 5 per share and a special dividend of Rs 3 per share to its shareholders. Together, the dividend payout is of 400% amounting to Rs 8 per share.

These dividends are expected to be paid on or after Monday, November 27, 2023.

This week, Navin shares rallied by nearly 2% on BSE. On Friday, the stock price ended at Rs 3609.30 apiece, marginally up from the previous session.

Established in 1967, NFIL operates one of the largest integrated fluorochemicals complexes in India with manufacturing locations at Surat and Dahej in Western India and Dewas in Central India. Our R&D centre named Navin Research Innovation Center (NRIC) is located in Surat, India.

Here's what brokerages say about Navin shares:

Prabhudas Lilladher:

Navin Fluorine International (NFIL) reported better performance on a YoY basis, led by HPP & specialty chemicals business. CDMO dragged performance for the quarter, however, it is expected to improve sequentially going ahead.

We believe HPP and Specialty Chemicals segments will drive robust growth (at 28-30% CAGR over FY23-26), with increasing use of fluorine in the Pharma and Agro space, battery chemicals and performance materials. The stock is trading at 30x FY26E EPS of Rs 133.6, with an expected improvement in RoE to ~20%, despite a huge capex (Rs8bn) over the next two years. We value the company at 30x FY26E EPS (earlier Target P/E at 40x) to arrive at our TP of Rs 4007 (earlier Rs 5064). We upgrade our rating from 'Accumulate' to 'Buy' as we believe the stock has corrected in the near term.

Emkay Global:

Management gave guidance that if not for this lost revenue, overall revenue would have been higher by ~Rs1bn, at Rs5.7bn. EBITDA stood at Rs1bn (up 5% YoY; down 14% QoQ) and margin was at 20.8%, primarily on lower operating leverage. Newer capex is expected to contribute largely from FY25, with gradual ramp up and demand visibility from customers. We trim our FY24/25/26 estimates by 3%/4%/6%, to factor in the relatively slower ramp up in newer projects. We maintain HOLD, with revised Sep-24E TP of Rs3,850.

Centrum:

We believe, Navin's growth would be thwarted by project execution delays, slow ramp up, and subdued agrochem macro which has led to lowering our estimates substantially.

We have also lowered the multiple due to diminishing premium, earlier assigned to the current MD for his execution delivery. Lowering our FY24E/ FY25E estimates by 23%/ 28%, lowered multiple from 40x to 35x, and rolling over our valuations to 1HFY26E, we downgrade the stock to ADD with a lowered TP of Rs3,881 (Rs5,267).

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.