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Domestic brokerage and research firm HDFC Securities in a recent note said that it has retained its Add rating on the specialty chemicals company Navin Fluorine International Limited's (NFIL) stock.

Explaining the rationale, the brokerage said that the rating is retained on the back of earnings visibility, given long-term contracts, and tilt in sales mix towards high-margin high-value business. HDFC Securities has retained its 'Add' rating on NFIL with a target price of 4,170 per share.

Highlighting the segmental performance, the brokerage said that ''the company's specialty chemicals (42% of revenue mix) and CRAMS (21%) business units (BU) grew 37/97% YoY to INR 1,330mn/670mn. The specialty chemicals BU continues to grow on the back of a mix of new products and market share gain. It is seeing good traction from domestic as well as global markets.''

The CRAMS BU has added new customers in the form of mid-sized bio pharma companies in the US, and fresh enquiries are coming in from its existing customers in Europe. NFIL plans to debottleneck its cGMP-3 plant in the next six months, post which, it plans to set up a cGMP-4 plant, the brokerage firm added in the note.

Navin Fluorine's Q1 margin was impacted negatively in the quarter due to higher raw material costs (YoY), pricing pressures, increased employee costs and higher maintenance expenses. Employee costs in Q1 significantly spiked due to addition of new employees, bonuses, increments and variable payments made in the quarter.

HDFC Securities said that it has cut its FY22 EPS estimate by 6% to 57.6, to account for higher raw material prices (YoY), increased employee costs, and adoption of a reduced tax rate in FY22.

Shares of Navin Fluorine have surged nearly 100% in one year and up around 35% this year (year-to-date or YTD).

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