ICICI Securities raises price on this multi-pocket specialty chemicals stock, raising price target

Local research and brokerage firm ICICI Securities organized managed Gujarat Fluorochemicals (GFL) for an investor meeting in Mumbai. The brokerage emphasized that it is optimistic about increased opportunities for fluoropolymers and battery chemistries over the next 5-10 years.

“After FY25, GFL expects significant opportunities from battery chemistries that they are planning to commercialize their first plant in the next two quarters. GFL is well-placed to drive revenue growth with significant exposure to the new age green hydrogen, solar and battery industries. It aspires to double revenue over the next three years and maintain EBITDA margins of at least 30-35%,” the note states.

The brokerage has increased its EPS estimate by 2-10% from FY23E-24E and has also raised its price target to 4,270 per person while maintaining a Buy rating on the Gujarat Fluoro stock. Special chemical warehouse has launched return multibagger about 100% in a year.

The company plans to expand capacity by 7 times in FKM, 4 times in PVDF and 4 times in PFA in the next two years, which will drive significant revenue growth in the new fluoropolymer area. These are high-value products, which ICICI Securities emphasizes, where the realized value is at $25-40/kg and the EBITDA margins are well above the company average.

“The GFL has brought forward the advancements of 8.8 billion to install wind power capacity of 125MW, of which 16MW is being deployed. The implementation of the remaining capacity depends on the government’s policy on wind power. Wind power is still the cheapest source of electricity at a cost of Rs 4/piece. However, if the policy remains unfavorable, the company expects INOX Wind to return the pending advances by March 2023,” it said.

The GFL has also provided guarantees about 18 billion for debt raised from subsidiaries (Wind and associates) and is expected to expire in March 2023. INOX Wind has raised capital in the past few quarters and has many plans. More fundraising is underway, which will help clean up its balance sheet, according to the brokerage firm.

Even so, the main risk, according to the broker, could be slower than expected, the process of increasing capacity utilization; price drops faster than expected; completion of the HFC project before the start of the capacity freeze (December 2023); and success in battery chemistry.

The views and recommendations given above are those of individual analysts or brokerage firms, not those of Mint.

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