Navin Fluorine (NFIL), part of the Arvind Mafatlal group, is a leader in fluorine based chemicals in India. It operates mainly in four segments i.e. Refrigerant, Organic Fluoride, Specialty Chemicals and CRAMs. While Refrigerant segment will continue to generate strong cash flows, the incremental focus of the company is the high margin and scalable specialty chemicals and CRAMs business. While the contribution from the JV with Piramal group is expected to commence from FY2018 onwards, NFIL has also entered into supply and technology licenses agreement with Honeywell to produce next generation automobile refrigerant.
NFIL’s presence in the high margin, scalable business with strong entry barriers makes it a unique player in the Indian specialty chemical industry. At the CMP, the stock is trading at 17x its FY2019E EPS and 10.1x EV/EBITDA. We believe NFIL would continue to attract premium valuations due to the long term growth visibility. We have valued the stock at 21x its FY2019E EPS and recommend BUY on the stock with 12 months target price of Rs3,650.

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