ICICI Securities has ’Buy’ rating on this multibagger specialty chemical stock, raises target price

Gujarat Fluorochemicals will start its battery chemicals plant in FY23, and some revenues are likely to flow in from FY24, highlighted brokerage ICICI Securities. The chemical manufacturer has increased capex outlay by 10% for the next two years on anticipation of a favourable market. 

The brokerage has increased its EPS estimates by 1-10% over FY23E-FY24E and has raised its target price on the specialty chemical stock to ₹3,400 (from ₹3,356) with maintaining Buy rating. Gujarat Fluoro shares have given multibagger return in a year's period of more than 200%.

“Gujarat Fluoro has outlined strong growth outlook for FY23 R125 and R142B to potentially add 10-11 ktpa to sales quantity from nil in FY22, benefit of 15-20% price increase in PTFE flow-through new fluoropolymers – expansion in capacity, and higher sales in more profitable products (FKM and PVDF) and likely double-digit price increase and new plant commissioning in fluorospecialty segment, and rise in utilisation,” the note stated.

Gujarat Fluoro is in the process to expand capacity to 13.2 ktpa. It expects to consume maximum capacity in FY23, where it is seeing strong demand for FKM and PVDF, and also expects double-digit price increase in FY23, ICICI Securities added.

The company has raised its capex guidance for FY23 by ₹2.5 bn to ₹11.5 bn. Higher capex is aimed to bring forward the capacity expansion for new fluoropolymers. It expects to add 4 ktpa capacity in this segment.

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