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ICICI Securities bullish on this multibagger specialty chemical stock, raises target price

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“Post FY25, GFL expects significant opportunities from battery chemicals for which it is planning to commercialise the first plant in next two quarters.  GFL is well placed to increase its revenues on the back of its significant exposure to new-age industries of battery, solar and green hydrogen. It aspires to double the revenue in next three years and maintain EBITDA margin at 30-35% at least," the note stated.

The brokerage house has increased EPS estimates by 2-10% over FY23E-24E and also has raised its target price to 4,270 apiece while maintaining Buy rating on Gujarat Fluoro shares. The specialty chemical stock has given multibagger return of about 100% in a year's period.

The company plans to expand capacity by 7x in FKM, 4x in PVDF, and 4x in PFA over the next two years, which will significantly drive revenue growth in new fluoropolymers. These are high-value products on which realisations currently are at $25-40/kg, and EBITDA margins are higher than the company average, ICICI Securities highlighted.

“GFL has given advances of 8.8 bn toward installation of wind power capacity of 125MW, of which 16MW is under implementation. The remaining capacity implementation is dependent on state policy for wind power. Wind power remains the cheapest source of power at a cost at Rs4/unit. However, if policy remains unfavourable, company expects INOX Wind to return pending advances by March 2023," it said

GFL has also provided guarantees of 18 bn for debt raised by its fellow subsidiaries (Wind and affiliated business), and anticipates to expiry these by also March 2023. INOX Wind has raised funds in past few quarters, and has more fund-raising plans in underway, which should help clean up its balance sheet stress, as per the brokerage.

Though, key risks, as per the brokerage could be slower than expected ramp-up in capacity utilization; faster than expected drop in prices; completion of HFC project before capacity addition freeze kicks in (December 2023); and success in battery chemicals.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint

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