Navin Fluorine not a one-man show but exits at top can slow expansion plans

Kotak Institutional Equities has cut its FY2024-26E EPS estimate for Navin Fluorine, citing possible delays in growth projects. Jefferies has downgraded the stock to ‘hold’ from ‘buy’ and reduced the target price to Rs 3,625 from Rs 5,475

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Navin Fluorine stock has slumped more than 16 percent in the past four sessions after the chemical company’s managing director Radhesh R Welling announced his departure, the second high-level exit in as many months. Ravi Venkataramanan stepped down as the CEO two months ago.

While analysts believe that Navin Fluorine is not a one-man show, they said the series of top-level exits could slow down expansion.

Foreign broking firm Jefferies has downgraded the stock to “hold” rating from “buy” and trimmed the target price to Rs 3,625 from Rs 5,475.

At 11.36 am, the stock had narrowed the losses from the opening and was quoting at Rs 3,718 on the NSE, still down 2.8 percent from the previous close.

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In a recent note, Kotak Institutional Equities expressed concerns about the company’s prospects. While acknowledging the departure of Welling, Kotak said the real issue lay in the ongoing downturn in the chemical industry.

The brokerage reduced its FY2024-26E EPS estimate for Navin Fluorine, citing potential delays in growth projects. It also adjusted the target price-to-earnings ratio to 30X and lowered the September 2024 fair value to Rs 4,170.

“We do not expect Mr Welling’s departure to leave a lasting impact on the company, just as the resignation of his predecessor Shekhar Khanolkar in 2018 did not. However, we wonder if the absence of a CEO will impact near term M&A plans or new project approvals,” Abhijit Akella and Sumit Kumar of Kotak wrote.

Jefferies, however, is certain that the churn at the top will make it difficult for the company to raise equity in the immediate future. “This is likely to slow down growth capex till the new MD establishes priorities after taking office,” it said.

Also Read: Reduce Navin Fluorine International; target of Rs 3890: ICICI Securities

Under Welling, Navin Fluorine’s capex rose to Rs 1,940 crore for FY22-24E, over seven times the FY19-21 capex of Rs 270 crore. Welling will continue in his role till December 25.

In a concall on October 4, the company said it was looking for external candidates.

“We cut FY24/25E Ebitda 13 percent on slower capex leading to delays in commissioning of new capacities,” Jefferies’ Bhaskar Chakraborty said.

Navin Fluorine is one of India’s leading players in the fluorochemicals space. The company has presence across specialty chemicals (47 percent of the revenue mix), high-pressure processing (37 percent), and Contract Development and Manufacturing Organisation of butyl molecules (19 percent of the revenue mix).

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