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Gujarat Fluorochemicals (GFL) posted strong results with strong realisation in caustic soda and PTFE that boosted profitability, highlighted brokerage house Edelweiss. The brokerage recently initiated coverage on Gujarat Fluoro shares as it believes that GFL offers strong growth opportunity in fluoropolymers and is a likely beneficiary of strong positioning in fluorine chemistry. 

As business the scenario improves in Q4FY22, Edelweiss has maintained its ‘Buy’ recommendation on the multibagger stock, that has rallied over 380% in a year's period, with a target price of 3,447 per share. The brokerage believes that with an encouraging outlook and higher realisation in Q4FY22, Gujarat Fluoro will likely beat its FY22 estimates.

The unavailability of raw material impacted the fluoropolymer business in the third quarter (Q3), while the fluorospeciality chemicals business was impacted due to a plant disruption during the quarter, the note highlighted.

“Management remains confident about strong pick up in earnings growth momentum as it addresses raw material issuesin fluoropolymers and strong pricing environment for PTFE (up by 20-25% in Q4FY22) while caustic soda prices have stabilised at higher level. Demand scenario for PTFE and fluoropolymers remain encouraging. GFL is expected to benefit from the proposed capacity expansion in these verticals in FY23," Edelweiss' note added.

Further, Gujarat Fluoro is looking to reduce its debt, driven by solid cash flow generation in FY22. It also expects to get its advances back from Inox Wind by June 2022, if it fails to receive regulatory approval for the wind power plant, the brokerage highlighted.

Gujarat Fluorochemicals Limited (GFL) is an Indian Chemicals Company with over 30 years of expertise in Fluorine Chemistry. The specialty chemical stock has surged over 13% in 2022 (year-to-date or YTD) so far.

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

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