RESULTS REVIEW 4QFY17 02 MAY 2017

Navin Fluorine International

NEUTRAL
INDUSTRY CHEMICALS Growth in CRAMS is key
CMP (as on 02 May 17) Rs 3,002 Navin Fluorines (NFIL) 4QFY17 revenues came in at follow its financial performance. Maintain NEUTRAL
Rs 2.0bn (+6% YoY), led by growth in the inorganic with a TP of Rs 3,300/sh (20x FY19E EPS).
Target Price Rs 3,300 segment. Higher volumes led to an EBITDA margin of Highlights of the quarter
Nifty 9,314 19.5% (+55bps YoY). EBITDA was Rs 390mn (+9%)
Specialty: Revenues were at Rs 630mn (-2%), led by
Sensex 29,921 and APAT Rs 294mn (-7% YoY, higher tax rate).
weakness in exports (-5%). Export revenues are mainly
KEY STOCK DATA NFILs CRAMS story started playing out in 2HFY16. related to agrochemicals, which is expected to show
Bloomberg NFIL IN However, there has been no major jump in revenues better results in 2017 (global agrochem market
No. of Shares (mn) 10 after the initial take off. The CRAMS business is declined in 2015/16).
MCap (Rs bn) / ($ mn) 29/458 lumpy, and building a customer base takes time. We CRAMS: Revenue was at Rs 450mn (+2% YoY). This
6m avg traded value (Rs mn) 33
remain confident about the success/ramp up of the business is lumpy, hence a quarterly comparison is not
Dewas facility. Also, benefits from the JV with appropriate. Piramal-JV had revenue of Rs 158mn.
STOCK PERFORMANCE (%)
Piramal Enterprises will be visible from FY18. The
52 Week high / low Rs 3,250/1,892
share of the high-margin business is expected to rise Refrigerants: Revenue was flat at Rs 580mn. Emissive
3M 6M 12M to ~65% by FY19E vs. 55% in FY16. EBITDA/PAT will usage will be capped under the Montreal Protocol.
Absolute (%) 11.0 22.7 49.8 grow at ~20% CAGR for the next few years. However, non-emissive usage will drive growth.
Relative (%) 4.6 15.4 32.9
NFIL has a net cash B/S, with no major capex in the Inorganic fluorides: Revenue grew to Rs 330mn
SHAREHOLDING PATTERN (%) (+44%), led by growth in both domestic business and
pipeline. Robust growth, a better product mix and
Promoters 38.68 exports. Steel and glass industries are the key drivers.
strong FCF will improve return ratios. RoCE/RoE will
FIs & Local MFs 17.70 rise to ~18% in FY19E from ~13% in FY16. However, Near-term outlook: Performance will be lacklustre,
FIIs 11.31 we feel that the rerating is already factored in (stock unless there is increased traction in CRAMS, or
Public & Others 32.31 is up 3.7x in 2-years), and now the stock will closely revenues starts from the JV with Piramal Enterprise.
Source : BSE Financial Summary (Standalone)
(Rs mn) 4QFY17 4QFY16 YoY (%) 3QFY17 QoQ (%) FY16* FY17P* FY18E* FY19E*
Net Sales 2,005 1,895 5.8 1,538 30.4 6,797 7,477 9,200 10,870
Satish Mishra EBITDA 390 359 8.9 304 28.5 1,174 1,578 1,951 2,294
satish.mishra@hdfcsec.com APAT 294 315 (6.7) 206 42.7 835 1,110 1,349 1,615
+91-22-6171-7334 Diluted EPS (Rs) 30.0 32.2 (6.7) 21.0 42.7 85.3 113.4 137.8 165.0
P/E (x) 35.2 26.5 21.8 18.2
Deepak Kolhe EV / EBITDA (x) 25.0 18.3 14.9 12.3
deepak.kolhe@hdfcsec.com RoE (%) 13.5 15.8 16.6 17.5
+91-22-6171-7316 Source: Company, HDFC sec Inst Research, * Consolidated
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Quarterly Financials Snapshot (Standalone)

(Rs mn) 4QFY17 4QFY16 YoY (%) 3QFY17 QoQ (%)
Net Sales 2,005 1,895 5.8 1,538 30.4
Inorganic segment led to Material Expenses 765 860 (11.1) 598 28.0
revenue growth Traded Goods 32 17 88.6 23 39.5
Employee Expenses 214 192 11.4 187 14.0
Other Operating Expenses 604 468 29.1 426 41.8
EBITDA 390 359 8.9 304 28.5
Depreciation 104 59 76.8 61 71.6
EBIT 286 300 (4.5) 243 17.8
Other Income (Including EO Items) 110 78 40.4 69 59.7
Interest Cost 3 8 (64.4) 0 875.5
PBT 393 370 6.3 311 26.2
Tax 99 55 81.5 105 (6.1)
RPAT 294 315 (6.7) 206 42.7
EO (Loss) / Profit (Net Of Tax) - - - - -
APAT 294 315 (6.7) 206 42.7
AEPS (Rs/sh) 30.0 32.2 (6.7) 21.0 42.7

Margin Analysis
4QFY17 4QFY16 YoY (bps) 3QFY17 QoQ (bps)
Material Expenses As % Of Net Sales 39.8 46.3 (651) 40.4 (61)
Employee Expenses As % Of Net Sales 10.7 10.1 53 12.2 (153)
A change in the product mix
Other Expenses As % Of Net Sales 30.1 24.7 543 27.7 242
improved margins EBITDA Margin (%) 19.5 18.9 55 19.7 (28)
EBIT Margin (%) 14.3 15.8 (154) 15.8 (153)
Net Profit Margin (%) 14.7 16.6 (197) 13.4 127
Tax Rate (%) 25.2 14.8 1,045 33.9 (867)

Segmental Revenue Analysis

Revenues from inorganic (Rs mn) 4QFY17 4QFY16 YoY (%) 3QFY17 QoQ (%)
fluorides have improved, with Refrigerants 580 580 - 370 56.8
traction in the metal industry Inorganic Fluorides 330 230 43.5 310 6.5
Specialty Chemicals 630 640 (1.6) 570 10.5
Revenues from CRAMS will CRAMS 450 440 2.3 290 55.2
remain lumpy Source: Company, HDFC sec Inst Research

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Quarterly Performance

Segmental Revenue Break-up Financials Trend: Strengthening Margins

Refrigerants Inorganic Fluorides Revenues (Rs mn) YoY Growth (%) (RHS)
EBITDA Margin (%) (RHS)
Share of value-add segments Specialty Chemicals CRAMS
2,500 Rs mn % 40.0
(specialty + CRAMS) is rising 100% 6 3 3 7 7 16 23 12
11
24 19 23 2,000 30.0
80% 35 45 40 37 44 32
39 37 1,500 20.0
60% 34 30 37 32
EBITDA margins have almost 20 18 16 16
17 15 17 1,000 10.0
doubled over the past two 40% 23 12 16 20 17
years 20% 39 29 40 33 41 35 30 31 40 29 500 -
24 29
0% - (10.0)

1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Geographical Break-up
Refrigerants - Domestic Inorganic Fluorides - Domestic Specialty Chemicals - Domestic
Refrigerants - Exports Inorganic Fluorides - Exports Specialty Chemicals - Exports
Specialty: Domestic is mainly 100% 100% 8 5 7 100%
related to Pharma and 21 13 9 14 9 11
30 34
80% 41 43 33 34 41 80% 80% 32
45 38 50 41 43
exports to Agrochemicals 45
60
60% 60% 60%
CRAMS is a 100% export- 40% 79 40% 87 91 86 92 95 91 93 89 40%
70 66
oriented business 59 57 67 66 59 55
68
55 62 50 59 57
20% 20% 20% 40

0% 0% 0%
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17

1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
Source: Company, HDFC sec Inst Research

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Yearly Performance

Segmental Breakup: Rising Share of Value-add Biz Profitability Trend

Bulk fluorides Refrigerants Revenues (Rs bn) - RHS Gross Margin (%)
We expect the share of the Speciality Chemicals Crams EBITDA Margin (%)
commodity business to reduce MOL CCPL
Rs bn
from 46% in FY16 to 35% in 100%
70% 12.0
58%
FY19E 3 5 5 13 60%
51% 10.0
80% 18
25 30 50% 56%
41 32 36 8.0
60% 35 30 40%
26 6.0
24 30% 21%
40%
Margins will remain strong 27 32
33 20%
4.0
32 28 24 12%
with higher utilisation of the 20% 21
10%
21% 2.0
Dewas facility 23 23 18 14 16 15 14 0% -
0%

FY17P
FY13

FY14

FY15

FY16

FY18E

FY19E
FY17P
FY13

FY14

FY15

FY16

FY18E

FY19E
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Strong Free Cash Flow Improving Return Ratios

The company remains net FCF CFO Capex RoE RoCE FCFF/EV (%)
cash and will have strong free Rs mn
2,500 %
cash flow 20.0
2,000
1,500 15.0
1,000
We have a built-in capex of Rs 500 10.0
-
600mn in CRAMS in FY18E.
(500) 5.0
The company has not yet (1,000)
announced this (1,500) -
(2,000)
(2,500) (5.0)
FY17P
FY13

FY14

FY15

FY16

FY17P
FY13

FY14

FY15

FY16
FY18E

FY19E

FY18E

FY19E
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Assumptions
FY13 FY14 FY15 FY16 FY17P FY18E FY19E
Revenue Growth (%)
Refrigerants (ex CER) (9.7) (12.0) 25.3 10.8 (0.5) 3.0 3.0
Specialty Chemicals 11.9 (12.4) 37.8 11.2 (4.6) 5.0 8.0
Bulk Fluorides 1.0 14.0 (7.0) (10.5) 27.7 12.0 12.0
Growth in CRAMS will remain CRAMS - 85.7 19.2 180.6 57.5 66.7 41.5
strong MOL 60.2 16.1 (7.9) 12.0 12.0 12.0
Total Revenues Of CCPL (Rs mn) 158 840 1,319
Revenues From Dewas New Facility (Rs mn) 480 930 1,800 2,700
CCPL revenues should start in Gross Margins (%)
FY18E Refrigerants (%) 50.0 60.0 58.0 55.0
Specialty Chemicals (%) 58.0 60.0 58.0 55.0
Bulk Fluorides (%) 38.0 50.0 50.0 50.0
CRAMS (%) 70.9 65.1 65.0 65.0
Standalone Gross Margin (%) 51.6 52.7 50.2 54.1 59.3 58.6 57.6
MOL EBITDA Margin (%) 10.8 13.4 19.3 8.0 14.0 14.0 14.0
CCPL EBITDA Margin (%) - - - - 14.0 15.3 15.3
Source: Company, HDFC sec Inst Research

Change In Estimates
(Rs mn) FY18E Old FY18E New YoY Gr (%) FY19E Old FY19E New YoY Gr (%)
Change in estimates factoring
Revenue 9,502 9,200 (3.2) 11,023 10,870 (1.4)
slower ramp-up of CRAMS and
EBITDA 2,000 1,951 (2.4) 2,332 2,294 (1.6)
CCPL (JV with Piramal
PAT 1,391 1,349 (3.0) 1,624 1,615 (0.5)
Enterprise)
EPS (Rs/sh) 142.1 137.8 (3.0) 165.9 165.0 (0.5)
Source: Company, HDFC sec Inst Research

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Peer Valuation
Mcap CMP TP EPS (Rs/sh) P/E (x) P/BV (x) ROE (%)
Rating
(Rs bn) (Rs/sh) (Rs/sh)* FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
AGROCHEMICALS
UPL 408.2 805 NEU 780 35.6 40.0 48.8 22.6 20.1 16.5 5.5 4.6 3.7 27.2 24.8 24.9
PI Industries 118.4 864 BUY 951 31.6 32.1 37.9 27.4 26.9 22.8 7.8 6.3 5.1 32.1 25.8 24.7
Rallis India 46.5 239 BUY 280 9.6 11.0 14.0 24.9 21.6 17.1 4.2 3.7 3.3 18.7 18.2 20.3
Dhanuka Agritech 45.0 917 BUY 881 25.3 31.9 40.1 36.2 28.7 22.9 9.3 7.6 6.2 25.7 29.0 29.8
Insecticides India 13.0 630 BUY 670 26.5 33.2 41.9 23.8 19.0 15.0 2.8 2.5 2.2 12.6 14.0 15.4
FERTILISERS
Coromandel Int 104.9 360 BUY 385 16.4 20.6 25.7 22.0 17.5 14.0 3.6 3.2 2.8 17.3 19.5 21.4
Chambal Fertilisers 41.9 101 BUY 100 9.7 9.8 10.0 10.4 10.3 10.1 1.6 1.4 1.3 15.9 14.4 13.2
CHEMICALS
SRF Ltd 101.6 1,769 NEU 1,663 85.0 93.8 110.9 20.8 18.8 15.9 3.3 2.9 2.5 17.1 16.5 17.1
Vinati Organics 51.6 833 BUY 848 26.1 33.9 38.6 31.9 24.6 21.6 6.7 5.5 4.5 22.7 24.5 23.0
Navin Fluorine 29.4 3,002 NEU 3,300 113.4 137.8 165.0 26.5 21.8 18.2 3.8 3.4 3.0 15.8 16.6 17.5
Source: Company, HDFC sec Inst Research, *As per previous published report

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Income Statement (Consolidated) Balance Sheet (Consolidated)

(Rs mn) FY15 FY16 FY17 FY18E FY19E (Rs mn) FY15 FY16 FY17P FY18E FY19E
Revenues 5,915 6,797 7,477 9,200 10,870 SOURCES OF FUNDS
Growth (%) 21.7 14.9 10.0 23.1 18.1 Share Capital 98 98 98 98 98
Material Expenses 2,890 3,111 3,029 3,897 4,724 Reserves 5,779 6,356 7,547 8,523 9,690
Employee Expenses 741 806 921 1,093 1,285 Total Shareholders Funds 5,877 6,453 7,645 8,621 9,788
Other Operating Expenses 1,562 1,706 1,949 2,259 2,567 Long-term Debt 275 475 511 511 511
EBIDTA 722 1,174 1,578 1,951 2,294 Short-term Debt 338 341 192 192 192
EBIDTA Margin (%) 12.2 17.3 21.1 21.2 21.1 Total Debt 613 816 703 703 703
Growth (%) 9.4 62.5 34.5 23.6 17.6 Deferred Taxes 323 370 434 434 434
Depreciation 201 225 299 368 392 Other LT Liabilities 276 287 281 281 281
EBIT 521 949 1,279 1,583 1,901 Minority Interest 129 0 0 0 0
Other Income 295 245 579 321 369 TOTAL SOURCES OF FUNDS 7,217 7,926 9,064 10,039 11,207
Interest 33 38 18 42 42 APPLICATION OF FUNDS
PBT 783 1,156 1,840 1,863 2,229 Net Block 2,329 2,869 4,288 5,158 5,344
Tax 200 321 456 514 614 CWIP 604 204 311 500 150
PAT 582 835 1,384 1,349 1,615 Goodwill 410 878 878 878 878
Minority Interest (37) (0) 0 - - LT Investments 1,160 1,167 1,084 1,084 1,084
Exceptional Items - - 273 - - LT Loans & Advances 906 964 326 326 326
APAT 546 835 1,110 1,349 1,615 Inventories 761 755 1,127 1,239 1,462
Growth (%) 4.1 53.1 33.0 21.5 19.7 Debtors 1,199 1,499 1,358 1,757 2,066
AEPS 55.7 85.3 113.4 137.8 165.0 Cash & Equivalents 834 819 1,280 960 1,983
Growth (%) 4.1 53.1 33.0 21.5 19.7 Other Current Assets 318 387 423 423 423
Source: Company, HDFC sec Inst Research Total Current Assets 3,111 3,460 4,189 4,380 5,935
Creditors 892 956 939 1,214 1,437
Other Current Liabilities 410 660 1,072 1,072 1,072
Total Current Liabilities 1,303 1,616 2,011 2,286 2,510
Net Current Assets 1,808 1,844 2,178 2,093 3,425
TOTAL APPLICATION OF FUNDS 7,217 7,926 9,064 10,039 11,207
Source: Company, HDFC sec Inst Research

Page | 7
 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Cash Flow (Consolidated) Key Ratios

(Rs mn) FY15 FY16 FY17P FY18E FY19E FY15 FY16 FY17P FY18E FY19E
Reported PBT 783 1,156 1,840 1,863 2,229 PROFITABILITY %
Non-operating & EO items (124) (57) (579) (321) (369) Gross Margin 51.1 54.2 59.5 57.6 56.5
EBITDA Margin 12.2 17.3 21.1 21.2 21.1
Interest expenses 33 38 18 42 42
EBIT Margin 8.8 14.0 17.1 17.2 17.5
Depreciation 201 225 299 368 392
APAT Margin 9.2 12.3 14.9 14.7 14.9
Working Capital Change (687) (335) 354 (236) (309) RoE 9.5 13.5 15.8 16.6 17.5
Tax Paid (196) (268) (456) (514) (614) Core RoCE 8.0 13.2 14.7 16.5 17.8
OPERATING CASH FLOW ( a ) 10 760 1,476 1,202 1,371 RoCE 8.1 11.4 13.2 14.4 15.5
Capex (623) (179) (1,829) (1,428) (229) EFFICIENCY
Free cash flow (FCF) (613) 581 (353) (226) 1,142 Tax Rate % 25.6 27.7 24.8 27.6 27.5
Investments (142) (7) 83 - - Fixed Asset Turnover (x) 2.5 2.6 2.1 1.9 2.1
Non-operating Income 295 245 306 321 369 Inventory (days) 46.9 40.6 55.0 49.2 49.1
Debtor (days) 74.0 80.5 66.3 69.7 69.4
Others 504 (586) (267) - -
Other Current Assets (days) 19.6 20.8 20.7 16.8 14.2
INVESTING CASH FLOW ( b ) 34 (527) (1,706) (1,107) 141 Payables (days) 55.1 51.3 45.8 48.2 48.3
Debt Issuance/(Repaid) 272 204 (113) (0) - Other Current Liab & Provns (days) 25.3 35.4 52.4 42.5 36.0
Interest Expenses (33) (38) (18) (42) (42) Cash Conversion Cycle (days) 60.1 55.1 43.8 45.0 48.4
FCFE (374) 746 (484) (268) 1,101 Net Debt/EBITDA (x) 0.8 0.7 0.4 0.4 0.3
Share Capital Issuance 0 0 0 - - Net D/E (0.0) (0.0) (0.1) (0.0) (0.1)
Dividend (183) (216) (370) (374) (448) Interest Coverage 24.5 31.6 86.6 45.7 54.5
Others (269) (123) (0) - - PER SHARE DATA (Rs/sh)
EPS 55.7 85.3 113.4 137.8 165.0
FINANCING CASH FLOW ( c ) (213) (173) (502) (415) (489)
CEPS 76.3 108.3 144.0 175.4 205.1
NET CASH FLOW (a+b+c) (169) 60 (732) (320) 1,023
DPS 16.0 21.0 31.5 31.8 38.1
EO Items, Others (660) (75) 1,193 - - BV 600.3 659.2 780.9 880.6 999.8
Closing Cash & Equivalents 834 819 1,280 960 1,983 VALUATION
Source: Company, HDFC sec Inst Research P/E (x) 53.9 35.2 26.5 21.8 18.2
P/Cash EPS (x) 39.4 27.7 20.8 17.1 14.6
P/BV (x) 5.0 4.6 3.8 3.4 3.0
EV/EBITDA (x) 40.4 25.0 18.3 14.9 12.3
EV/Revenue (x) 4.9 4.3 3.9 3.2 2.6
OCF/EV (%) (0.2) 2.2 6.4 4.5 5.3
FCFF/EV (%) (2.4) 1.6 0.1 (0.4) 4.5
FCFE/M CAP (%) (2.4) 1.5 0.0 (0.5) 4.2
Dividend Yield (%) 0.5 0.7 1.0 1.1 1.3
Source: Company, HDFC sec Inst Research

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

RECOMMENDATION HISTORY
Date CMP Reco Target
Navin Fluro TP
2-May-16 1,743 BUY 2,150
3,300 8-Jul-16 1,999 BUY 2,150
3,100 26-Jul-16 2,284 BUY 2,700
2,900 7-Oct-16 2,400 BUY 2,850
2,700 26-Oct-16 2,649 BUY 3,100
2,500 24-Jan-17 2,741 BUY 3,200
2,300 13-Apr-17 3,136 NEU 3,319
2,100 2-May-17 3,002 NEU 3,300
1,900
1,700 Rating Definitions
1,500
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Aug-16

Apr-17
Jan-17
Jul-16

Sep-16

Feb-17
Nov-16
Jun-16
May-16

May-17
Dec-16

Mar-17
Oct-16

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 NAVIN FLUORINE: RESULTS REVIEW 4QFY17

Disclosure:
We, Satish Mishra, PGDM, & Deepak Kolhe, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No

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