Gujarat Fluorochemicals shares up 34% in 3 months: What’s driving the rally?

Byexpertzeeshan

ET Intelligence Group: The shares of Gujarat Fluorochemicals have gained nearly 34% in the past three months helped by strong growth in revenue and profit in the June quarter. The company plans to expand capacity in higher-end fluoropolymers used in semiconductors, data centres, electronics, automotive and green hydrogen applications. It will spend about ₹2,300 crore on EV-related projects and around ₹800 crore on the chemical business in FY27 as part of a larger ₹6,000 crore capex programme over two years. While the chemicals business is expected to continue generating healthy growth and cash flows, the battery materials segment is expected to emerge as a new growth engine. The stock trades at a price-to-earnings (P/E) multiple of 89, a premium to the three- and five-year average of 59 and 36, reflecting expectations of higher future earnings growth.

The company reported 24% year-on-year growth in revenue and 20% growth in net profit in the June quarter, driven by strong performance of the fluoropolymers and fluorochemicals businesses. They accounted for 58% and 29% of total revenue, in that order.

Solid Core, Expansion in Battery Space may Keep Gujarat Fluorochem BrightAgencies

The company expects the fluoropolymers business to grow by 17%-20% annually in future, driven by a greater contribution from high-value products. PL Capital expects Fluoropolymers to remain the primary growth driver, while battery chemicals may take longer to make a meaningful contribution to top line, with LiPF6 (a key material for lithium ion batteries) likely to be the key contributor in FY27. The brokerage expects the company’s earnings per share (EPS) to rise to ₹86.5 in FY28 from ₹52.5 in FY26 and return on equity (ROE) to improve to 10.4% from 7.6% by similar comparison.The company’s existing R32 (a refrigerant gas used in air conditioning systems) capacity operates at the peak utilisation, and the additional capacity is expected to be commissioned by the end of September quarter. By the end of FY27, the company expects to offer a broader range of refrigerants across global markets.

Earnings opportunity for the company in advanced battery materials is expected to grow over the coming years, although the benefits are likely to emerge with a lag. Management expects the full potential of its battery materials investments to start reflecting from FY28.

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