1 P a g e. Report By: Surbhi Bagaria Page 1

Transcription

1 1 P a g e Report By: Surbhi Bagaria surbhi@dynamiclevels.com Page 1

2 Navin Flourine International Ltd (NFIL) - Scaling up through Innovation Company Overview and Stock price. 3 Product Overview....4 Key Highlights Chemical & Petrochemicals Industry Outlook....7 Company Financials Peer Comparison Shareholding Pattern Company s Strength &Future Outlook Investment Rationale Page 2

3 Company s Overview and Stock Price Navin Fluorine International Ltd (NFIL) is one of the largest and the most respected Indian manufacturers of speciality fluorochemicals. It belongs to the Arvind Mafatlal Group one of India s oldest industrial houses. 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. NFIL has 4 main strategic business units: Refrigeration Gases Inorganic Fluorides Speciality Fluorides Contract Research And Manufacturing Services (CRAMS) The Company posted exceptional Q2 result in FY The company's Q2 (July-Sep) revenue up by 21% YoY to 183 Cr, 2. Operating EBITA up 28% to rs 41 Cr, 3. Operating EBITDA Margin up 22.3% by 129 Bps, 4. Operating PBT grew by 32% YoY to Rs 35 Cr, 5. Adjusted PAT growth was seen at 28% YoY to Rs 28 Cr COMPANY PROFILE OF NAVIN FLOURINE Date of Incorporation 25-June-1998 Date of Listing 01-June-2007 Management Name Designation Vishad Mafatlal Chairman R V Haribhakti Director V P Mafatlal Director T M M Nambiar Director S S Lalbhai Director S M Kulkarni Director S G Mankad Director P N Kapadia Director H H Engineer Director S S Khanolkar Managing Director Registered Office Address 2nd floor, Sunteck Centre,37/40 Subhash Road,Vile Parle (East),400057,Mumbai,Maharashtra,India Website Chart Hypothesis: Above is the weekly price chart of NFIL for last 1 yr, in which we can see that it made a new high of 2876 recently and has given correction of 13% post result and is available at good support. Share Price Performance EXCHANGE SYMBOL NAVIN FLOURINE Current Price * (Rs.) 2485 Face Value (Rs.) (24-Oct- 52 Week High (Rs.) 16) 1266 (29-Feb- 52 Week Low (Rs.) 16) 2876 (24-Oct- Life Time high (Rs.) 16) Life Time low (Rs.) 74 (25-Mar-09) Average Daily Movement Average Volume [20 days] Month Return (%) P/E Ratio (x) Book Value Market Cap (Cr) % of Promoter holding pledged 9.37 Sector CHEMICALS Standalone Trailing PE Ratio Page 3

4 Product Overview 1. Pioneer in Refrigerants in India: NFIL offers refrigerants under its brand name Mafron, which over the years, has become a generic name for refrigerants in India and in many other global markets. It is used in various Industries like: Window and split room air conditioners Chillers, packaged air conditioners and commercial and industrial refrigeration units Intermediate for API s Fluoropolymer resins Domestic and Industrial refrigerators Mobile air conditioning (MAC) NFIL s Strengths in Refrigerants High performance and high quality refrigerants Suitable for various refrigeration and air conditioning applications Strong domestic and overseas distribution network Supplied in returnable cylinders, disposable cylinders and ISO tanks 2. Inorganic Fluorides: NFIL has a long and rich experience in manufacturing various inorganic fluorides with capacity, flexibility and experienced work force. NFIL has the ability to develop products as per customer s need. Industries and Application segments: Oil & Gas & Solar energy Stainless Steel Pharmaceutical & Agrochemicals Abrasives Electronics NFIL s Strengths in Inorganic Fluorides High quality reputed supplier Ability to develop products as per customers specifications Excellent distribution network in India and overseas Can deliver in wide range of packaging s conforming to international standards Ready stocks enabling customers to save time Page 4

5 3. Large Scale Manufacture of Specialty Fluoro Intermediates Company s expertise, built through decades of experience in fluorine chemistry, coupled with state of art manufacturing infrastructure enables them to produce a wide range of value added Specialty fluoro intermediates in large quantities in a safe and responsible manner. NFIL has dedicated multipurpose plants (MPP) to process multi step products and intermediates which are high in the value chain. It has capabilities to handle complex chemistries and deliver high quality products in all forms. NFIL is one of the leading high quality producers of Boron trifluoride gas and it s adducts. NFIL has built excellent relationships with Indian and Global life science and agro chemical companies as they always focus on existing, diverse and emerging needs of their clients. Industries and Application segments: Pharmaceuticals Crop protection Hydrocarbon Fragrances 4. Contract Research and Manufacturing Services (CRAMS): NFIL offers custom chemical syntheses of fluorinated compounds for the pharmaceuticals, agro chemicals and speciality chemicals industries. They are building upon their solid experience and expertise in fluorine chemistry, fluorination and reagents, both in research and development and in manufacturing areas. NFIL offering and capabilities include basic research, library syntheses, process development, scale up and small and large batch manufacturing. NFIL provides a comprehensive basket of services for developing new products, processes and novel technologies to its clients with complete large scale manufacturing support ensuring stringent customer specifications and regulatory compliance. Manchester Organics Limited, subsidiary of NFIL operates out of the UK and works very closely with CRAMS team in offering a wide basket of research and custom synthesis services spanning all areas of the chemical industry, ranging from pharmaceuticals and crop protection to electronics. Page 5

6 Key Highlights: Greenfield Facility at Dahej, Gujarat JV with Piramal Enterprises Ltd. to develop, manufacture and sell speciality Fluorochemicals for healthcare segment Product validation in process Entered into agreement with Honeywell For a small scale manufacturing project on HFO-1234 yf Next Generation Refrigerant Gas with GWP less than 1 For use in vehicle air conditioning systems. Exceptional Item in Q2 FY17 Exceptional Item amounting to Rs Crs is profit arising out of divestment of long term investments, i.e., shareholding in Group Companies during the quarter, as part of agreement executed amongst Promoter, Promoter Group & three listed entities Arvind Mafatlal Group Page 6

7 Chemicals and Petrochemicals Industry Outlook Position of Chemical industry in world Foreign Investor in Chemicals Sector: India is the largest producer of chemicals in Asia and sixth by output, in the world. The chemicals industry is a key constituent of the Indian economy, accounting for about 1.38% of the nation s GDP. India is currently the world s third largest consumer of polymers and fourth largest producer of agro-chemicals. India s proximity to the Middle East, the world s source of petrochemical feedstock, makes for economies of scale. Strong government support for R&D. Polymers and agro-chemicals industries in India present immense growth opportunities. 100% FDI permitted through automatic route. Chemical Sector is delicensed except for few hazardous chemicals. Upcoming Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) & Plastic Parks will provide stateof-the-art infrastructure for Chemical & Petrochemicals Sector. Market Size Trade in most of the chemicals is free except for those attracting provision of international conventions. The estimated size of the market is USD 144 Billion. India accounts for approximately 16% of the world production of dyestuff and dye intermediates. Total production of the Indian chemicals industry was 19,308 Thousand Metric Tonnes in It is one of the most diversified sectors, covering more than 70,000 commercial products. Current production of polymers is around 9 Million Tonnes with imports of around 2.8 Million Tonnes. Polymer demand is expected to grow by 8-10% with healthy growth in industries such as clothing, automobiles etc. Mitsubishi Chemical Corporation (Japan) BASF (Germany) ADEKA (Japan) Akzo Nobel (Netherlands) DuPont (USA) Syngenta (Switzerland) Croda (UK) DyStar (Germany) Henkel (Germany) Dow Chemicals (USA) Rhodla (Belgium) Wacker Metroark (Germany) Page 7

8 Parameter driving Chemical Sector A large population, huge domestic market dependence on agriculture and strong export demand are the key growth drivers for the industry. A global shift towards Asia as the world s chemicals manufacturing hub Per capita consumption of chemicals in India is lower as compared to western countries, so immense scope for new investments. Rise in GDP and purchasing power generates huge growth potential for the domestic market. A focus on new segments such as specialty and knowledge chemicals. Low-cost manufacturing. Skilled science professionals. World-class engineering and strong R&D capabilities. FDI POLICY 100% Foreign Direct Investment (FDI) is allowed under the automatic route in the chemicals sector, subject to all the applicable regulations and laws. Government Initiatives BUDGET ANNOUNCEMENTS FOR 2O15-2O16: Reduced Basic Customs Duty (BCD) on Ulexite from 2.5% to 0%. Reduced Special Additional Duty (SAD) on Naphtha from 4% to 2%. Reduced BCD on Styrene Monomer from 2.5% to 2%. Further, SAD on this product has been reduced from 4% to 2%. Reduced BCD on Ethyleme Dichloride from 2.5% to 2%. Further, SAD on this product has been reduced from 4% to 2%. Reduced BCD on Vinyl Chloride Monomer from 2.5% to 2%. Further, SAD on this product has been reduced from 4% to 2%. Reduced BCD on Isoprene from 5% to 2.5% Reduced BCD on Anthraquinone for Hydrogen Peroxide from 7.5% to 2.5% Reduced BCD on Butyl Acrylate from 7.5% to 5%. Reduced BCD on Liquefied Butanes from 5% to 2.5%. Page 8

9 Company Financials Income Statement ( In Cr) Sep-16 June-16 Sep-15 QoQ Growth YoY Growth Net Sales/Income from operations % 20.94% Other Operating Income % % Total Income From Operations % 20.76% Increase/Decrease in Stocks % % Consumption of Raw Materials % 13.12% Purchase of Traded Goods % % Employees Cost % 17.82% Depreciation % 30.22% Other Expenses % 10.27% Total Expenditure % 19.22% Operating Profit % 27.82% Other Income % % P/L Before Int., Excpt. Items & Tax % 13.88% Interest % % P/L Before Exceptional Items & Tax % 16.35% Exceptional Item P/L Before Tax % 94.08% Tax % 7.38% P/L After Tax from Ordinary Activities % % PAT % % Equity Share Capital % 0.20% EPS (Rs.) [After Extraordinary items] % % Profitability Highlights 1. The company's Q2 (July-Sep) revenue up by 21% YoY to 183 Cr, 2. Operating EBITA up 28% to rs 41 Cr, 3. Operating EBITDA Margin up 22.3% by 129 Bps, 4. Operating PBT grew by 32% YoY to Rs 35 Cr, 5. Adjusted PAT growth was seen at 28% YoY to Rs 28 Cr. Page 9

10 Balance Sheet ( In Cr) FY 2016 FY 2015 Growth % EQUITIES AND LIABILITIES SHAREHOLDERS FUNDS Equity Share Capital % Total Share Capital % Reserves and Surplus % Total Reserves and Surplus % Total Shareholders Funds % NON-CURRENT LIABILITIES Long Term Borrowings % Deferred Tax Liabilities [Net] % Other Long Term Liabilities % Long Term Provisions % Total Non-Current Liabilities % CURRENT LIABILITIES Short Term Borrowings % Trade Payables % Other Current Liabilities % Short Term Provisions % Total Current Liabilities % Total Capital And Liabilities % ASSETS NON-CURRENT ASSETS Tangible Assets % Intangible Assets % Capital Work-In-Progress % Fixed Assets % Non-Current Investments % Long Term Loans And Advances % Total Non-Current Assets % CURRENT ASSETS Current Investments % Inventories % Trade Receivables % The Conslidated Financials include the financials of three foreign Cash subsidiaries And Cash and Equivalents two Indian subsidiaries & 2 JV Companies: % Short Term Manchestar Loans And Organics Advances Ltd % OtherCurrentAssets NFIL (UK) Ltd- Foreign % Total Current Navin Assets Florine (Shanghai) Co Ltd- Foreign % Total Assets Sulakshana Securities Ltd- Indian % Urvija Associates Ltd- Indian Swarnim Gujarat Fluorspar Pvt Ltd-JV The Conslidated Convergence Financials Chemicals include Pvt Ltd-JV the financials of three foreign subsidiaries and two Indian subsidiaries & 2 JV Companies: Foreign: Manchestar Organics Ltd, NFIL (UK) Ltd, Navin Florine (Shanghai) Co Ltd Indian : Sulakshana Securities Ltd, Urvija Associates Ltd JV : Swarnim Gujarat Fluorspar Pvt Ltd, Convergence Chemicals Pvt Ltd Page 10

11 Cash Flow ( In Cr) Mar mths Mar mths Mar mths Net Profit/Loss Before Extraordinary Items And Tax Net CashFlow From Operating Activities Net Cash Used In Investing Activities Net Cash Used From Financing Activities Foreign Exchange Gains / Losses Adjustments on Amalgamation / Merger / Demerger / Others Net Inc/Dec In Cash And Cash Equivalents Cash And Cash Equivalents Begin of Year Cash And Cash Equivalents End Of Year Page 11

12 Key ratios Highlights Ratios FY 2016 FY 2015 PER SHARE RATIOS Diluted EPS (Rs.) Cash EPS (Rs.) Book Value[Excl.RevalReserv]/Share (Rs.) Book Value[Incl.RevalReserv]/Share (Rs.) Revenue From Operations / Share (Rs.) PBDIT / Share (Rs.) PBIT / Share (Rs.) PBT / Share (Rs.) Net Profit / Share (Rs.) NP After MI And SOA / Share (Rs.) PROFITABILITY RATIOS PBDIT Margin (%) PBIT Margin (%) PBT Margin (%) Net Profit Margin (%) NP After MI And SOA Margin (%) Return on Networth / Equity (%) Return on Capital Employeed (%) Return On Assets (%) Long Term Debt / Equity (X) Total Debt / Equity (X) Asset Turnover Ratio (%) LIQUIDITY RATIOS Current Ratio (X) Quick Ratio (X) Inventory Turnover Ratio (X) Dividend Payout Ratio (NP) (%) Dividend Payout Ratio (CP) (%) Earning Retention Ratio (%) Cash Earning Retention Ratio (%) COVERAGE RATIOS Interest Coverage Ratio (%) VALUATION RATIOS Enterprise Value (Cr.) EV / Net Operating Revenue (X) EV / EBITDA (X) MarketCap / Net Operating Revenue (X) Retention Ratios (%) Price / BV (X) Price / Net Operating Revenue (X) EarningsYield Page 12

13 Peer Comparison Comparative Ratio Analysis COMPANY NAME NPM(%) AVERAGE 3-YEARS RONW(%) AVERAGE 3-YEARS Navin Fluorine Inter S H Kelkar & Company Camlin Fine Sciences Shree Pushkar Chemic Valuation COMPANY NAME CURRENT PRICE(RS.) P/E P/BV MCAP/REVENUES Navin Fluorine Inter S H Kelkar & Company Camlin Fine Sciences Shree Pushkar Chemic Financial Comparision COMPANY NAME REVENUES (RS CR.) 3- YEAR CAGR(%) PBDIT (RS CR.) 3- YEAR CAGR(%) PAT (RS CR.) 3- YEAR CAGR(%) Navin Fluorine Inter S H Kelkar & Company Camlin Fine Sciences Shree Pushkar Chemic Particulars Total (Rs Cr.) Proportionate Distribution (%) Navin Fluorine Inter S H Kelkar & Company Camlin Fine Sciences Shree Pushkar Chemic Revenue 2, % 39.52% 20.87% 10.61% PBDIT % 37.71% 17.06% 9.11% PAT % 36.16% 16.15% 10.05% Page 13

14 Shareholding Pattern Shareholding Pattern Sep-16 Jun-16 Promoter and Promoter Group (%) Indian Foreign NIL NIL Public Shareholding Institutions (%) Mutual Funds Foreign Portfolio Investors NonInstitutions (%) Total no. of shares (cr.) Promoter Holding Pledged (%) NIL NIL Mutual Funds having investment more than 1 Cr Value (In cr) Sep-16 Aug-16 Jul-16 DSP BlackRock Micro-Cap Fund Reliance Small Cap Fund Sundaram S.M.I.L.E.Fund Canara Robeco Emerging Equities L&T India Value Fund - Regular Plan Principal Emerging Bluechip Fund Tata Mid Cap Growth Fund - Regular Plan Canara Robeco Balance Sundaram Select Micro Cap Series VI Sundaram Rural India Fund HSBC Midcap Equity Fund Sundaram Select Micro Cap Series V Sundaram Select Micro Cap Series VII Tata India Tax Savings Fund - Regular Plan Sundaram Value Fund Series I Canara Robeco India Opportunities Fund Tata Retirement Savings Fund - Progressive Plan Canara Robeco Monthly Income Plan Sundaram Select Micro Cap Series VIII Canara Robeco India Opportunities Fund - Series Sundaram Select Micro Cap Series IX Page 14

15 Company s Strength & Future Outlook Fluorination Capabilities: Pioneered Manufacturing of Refrigerant Gases in India Over 45 years of experience in handling Fluorine Extensive expertise focusing on specialty fluorine chemistry Manufacturing: Chemical Complex at Surat spread over 135 acres, houses Refrigerant,Inorganic Fluorides & Specialty Chemicals Plants cgmp Compliant Pilot plant for CRAMS in Dewas cgmp Compliant Manufacturing plant for CRAMS fully operational In-house R&D: State-of-the-art R&D centre Navin Research Innovation Centre at Surat DSIR approved R&D Centre Supports in product addition & process efficiency in all business units R&D strength augmented by Manchester Organics Acquisition Raw Material Sourcing: Backward integration for Raw material through 25% JV partner in the only Fluorspar beneficiation company in India Supply from JV to commence in FY18 Diversified sourcing of Fluorspar away from China Page 15

16 Investment Rationale NFIL posted exceptional Q2 result in FY 17. The company's Q2 (July-Sep) revenue up by 21% YoY to 183 Cr, Operating EBITA up 28% to rs 41 Cr, Operating EBITDA Margin up 22.3% by 129 Bps, Operating PBT grew by 32% YoY to Rs 35 Cr, Adjusted PAT growth was seen at 28% YoY to Rs 28 Cr The new manufacturing facility set in Dewas for high pressure fluorination in the only plant in India and it has started its commercial operations NFIL entered in JV with Honeywell on 22nd March for manufacturing next generation Refrigerant Gas with GWP less than for vehicle air conditioning systems. This partnership will help meet growing global demand for environmentally preferable refrigerant. NFIL was up by 20% on 23 rd March after this agreement was signed. Production is expected to begin by the end of 2016 NFIL s entered into joint Venture with Piramal Ent. Ltd to develop, manufacture and sell specialty Fluor chemicals for healthcare segment in The strategic joint venture aims to leverage NFIL S capabilities and Piramal's strong presence in healthcare. With the increasing importance of fluorine in life sciences, there is a considerable potential to exploit synergies between the two companies. Supply is expected to commence by FY18 NFIL is entering new counties by introducing new molecules in Inorganic Fluorides segment and Speciality Chemicals segment. Government Reduced Basic Customs Duty (BCD) and Special Additional Duty (SAD) on various chemicals which will benefit NFIL NFIL exports 100% of Contract Research and Manufacturing Services (CRAMS) Government has allowed 100% FDI through automatic route. The estimated size of the market is USD 144 Billion. We recommend BUY in Navin Fluorine International with the target of NFIL is a top performer in Chemical Sector. Page 16

17 Disclaimer: Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, Dynamic Equities Pvt. Ltd. is a member of National Stock Exchange of India Ltd. (NSEIL), Bombay Stock Exchange Ltd (BSE), Multi Stock Exchange of India Ltd (MCX- SX) and also a depository participant with National Securities Depository Ltd (NSDL) and Central Depository Services Ltd.(CDSL). Dynamic is engaged in the business of Stock Broking, Depository Services, Investment Advisory Services and Portfolio Management Services. Dynamic Equities Pvt. Ltd. is holding company of Dynamic Commodities Pvt. Ltd., a member of Multi Commodities Exchange (MCX) & National Commodity & Derivatives Exchange Ltd.(NCDEX). We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered. SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on for certain operational deviations. Answers to the Best of the knowledge and belief of Dynamic/ its Associates/ Research Analyst who prepared this report DYANMIC/its Associates/ Research Analyst/ his Relative have any financial interest in the subject company? No DYANMIC/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company? No DYANMIC/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the research report or at the time of public appearance? No DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve months? No DYANMIC/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject company in the past twelve months? No DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months? No DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months? No DYANMIC/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the Subject Company or third party in connection with the research report? No DYANMIC/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company? No DYANMIC/its Associates/ Research Analyst/ his Relative have been engaged in market making activity for the subject company? No General Disclaimer: - This Research Report (hereinafter called Report ) is meant solely for use by the recipient and is not for circulation. This Report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through Dynamic nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security (ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by Dynamic to be reliable. Dynamic or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of Dynamic shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including loss profits arising in any way whatsoever from the information / opinions / views contained in this Report. The price and value of the investments referred to in this Report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Dynamic levels do not provide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding taxation aspects of any potential investment. Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our views expressed in this Report. User should keep this risk in mind and not hold dynamic levels, its employees and associates responsible for any losses, damages of any type whatsoever. Dynamic and its associates or employees may; (a) from time to time, have long or short positions in, and buy or sell the investments in/ security of company (ies) mentioned herein and it may not be construed as potential conflict of interest with respect to any recommendation and related information and opinions. Without limiting any of the foregoing, in no event shall Dynamic and its associates or employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind. We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of Research Report. Dynamic may have proprietary long/short position in the above mentioned scrip(s) and therefore may be considered as interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with Dynamic. Dynamic Equities Pvt. Ltd. are also engaged in Proprietary Trading apart from Client Business. Page 17