02 Dec , 2021 By : Kanchan Joshi
Domestic brokerage and research firm ICICI Securities has initiated coverage on multibagger stock Gujarat Fluorochemicals (GFL) with a ‘Buy’ rating as it believes GFL is in a sweet spot with its presence in fluoropolymers, demand for which is increasing driven by the new-age verticals of battery, solar panel and green hydrogen.
Specialty chemical stock Gujarat Fluoro has given multibagger return of over 142% in six months period alone, whereas it has surged 289% in year-to-date terms. The brokerage's Buy recommendation comes with a target price of Rs3,086 per share. “Despite the strong earnings outlook, GFL is trading at a reasonable P/E multiple of 20x FY24 vs 42.1x for Navin Fluorine and 27.5x for SRF," the note stated.
Demand for fluoropolymers has increased due to their higher performance and increased use in new-age verticals. GFL is the sole manufacturer of fluoropolymers in India and is among the very few players outside of China to have a large fluoropolymer portfolio, as per the brokerage.
“It is in a sweet spot in specialty fluoropolymers where the Chinese have limited global presence, and western and Japanese players are not adding meaningful capacity. GFL has not only built global scale production capacity, but has also established technical sales team (to drive application expertise) and supply chain," ICICI Securities' note added.
Further, GFL is in the process of expanding its capacity in fluoropolymers, which provides visibility on growth during the brokerage's forecast period (FY21-FY24E). GFL is also expanding into other fluorine derivatives used in the new-age verticals, which expands the company’s addressable market and provides a vista of sustained growth.
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