Gujarat Flourochemicals shares gain after subsidiary commences operations in Dubai

Gujarat Flourochemicals shares gained 3 percent in early trade after the company’s wholly-owned subsidiary, Gujarat Flourochemicals FZE, started commercial operations in Dubai. The shares were up 1.82 percent at Rs 2,806.9 at 11.26 am on the National Stock Exchange.

There is no clarity on the type of chemical plant or the molecule that will be produced in Dubai.

ICICI Direct has a buy call on the stock at a target price of Rs 4,000. The domestic brokerage firm expects revenue and Earnings Before Income Tax Depreciation and Amortisation (EBITDA) to grow at a CAGR of 25 percent and 32 percent, respectively over FY23-25. Compunded Annual Growth Rate or CAGR is the rate at which EBITDA or revenue will grow every year.

The financials

ICICI Direct expects expansion based on vertically integrated model to maximise value addition and mitigate the risk of raw material price volatility. It further says that Gujrat Flourochemicals’ vertical integration is expected to drive profit margins and return ratios.

Gujarat Flourochemicals’ revenue increased 40 percent year-on-year to Rs 5,775 crore in FY23. Net profit increased 68 percent year-on-year in FY23 to Rs 13,328 crore. EBITDA margins increased 471 basis points year-on-year in the same period.

In the January to March quarter, Gujarat Flourochemicals’ bulk business saw a 17-percent decline sequentially. This was because bulk chemical prices dropped on account of excessive supply in the market, the company said in its Q4FY23 conference call. The fluoropolymer business also declined 5 percent sequentially during the quarter. The flourochemical business has grown 36 percent quarter-on-quarter on account of strong refrigerant demand.

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