Navin Fluorine Stock Analysis

F
Atomic Number 9

Fluorine
Atomic
Weight

18.998

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 Why Fluorination is
an Element from Hell
It reacts virtually with every element
except three elements.
It is lethal at very low levels. Water and
CO2 fire extinguishers only add fuel to
the fire. School of Intrinsic Compounding
Only way to extinguish a fluorine fire is
to shut off the source of fluorine.
Lucifers Chemical

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M
E
Inorganic Fluorides &
T Eggs Refrigerants
A
M
O Larva
Speciality Chemicals

F
R Navin Fluorine

P Atomic Number 9

H Fluorine
Atomic

Pupa
Weight

CRAMS
O
18.998

S
I School of Intrinsic Compounding
S Adult High Performance Product (HPP)
 Refrigerants Revenue Break-up

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 Inorganic Fluoride
Revenue Break-up
(in crores)

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 Speciality Chemicals
Revenue Break-up
Speciality Chemicals Revenue Break-up (in crores)

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 CRAMS Revenue Break-up
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(in crores)

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 Revenue Contribution
Q4FY21

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End User Industry of Speciality Chemicals
Industrial Chemicals
20%

Pharmaceuticals
40%

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Agrochemicals
40%
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 BUSINESS UNITS

CRAMS Commenced CRAMS Business in 2011

SPECIALTY
Commenced Speciality Chemicals in 2000
CHEMICALS

School INORGANIC
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Traditional Business since 1967
FLUORIDES

REFRIGERANTS Traditional Business since 1967

Rising up Fluorine Value-Pyramid

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 Value Chain

Key Starting Advanced Active End

Formulation
Material Intermediate Substance Product

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 Key Customers

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"Charlie & I encourage bolt-ons, if they are sensibly-priced. These purchases

deploy capital in operations that fit without existing businesses and that will be
managed by our corps of expert managers. That means no additional work for
us, yet more earnings for Berkshire, a combination we find highly appealing.
We will make many dozens of bolt-on deals in future years."
-Warren Buffett
 Manchester Organics Acquisition

Reasons for Acquiring Manchester Organics:

Manchester Organics Ltd established in 1996 has a strong legacy in
fluorination & high special chemistry.
On one side, MOL directly works with innovative pharma companies on
milligram to multi-kilo research phase. On the other, Navin has
capabilities of CRAMS with experience in multi hundred kilos to multi
ton production.  School of Intrinsic Compounding
MOL brings access to global innovator pharma companies and to
cutting edge fluorination chemistries which enhances value-added
product portfolio of CRAMS & speciality chemicals.
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 Capabilities of Manchester Organics

Many molecules which started off with Manchester Organics

are now getting commercialised in Devas facility.
In 2011, MOL had a catalogue of 8,000 chemicals. Fast forward
to 2020, this catalogue has grown to 51,000 chemicals.
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How does this Catalogue help Navin?
Today, some of the molecules which Navin offers at 100 to
500 kg levels have been given to those customers 3 to 5 years
back by MOL.
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 High Performance Product Contract

Navin entered into a $410 million contract (2,800 crores) for

manufacture & supply of a High Performance Product (HPP) in the
fluorochemical space.
This is first of its kind contract for Navin Fluorine & the company will
get royalty-free access to the technology.
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This is a patented product & Navin will manufacture both the
intermediate & the final product.
The company will make ROCE of 20-25% on this product & in case of
contract cancellation, Navin will get adequate compensation & full
margin protection.
Supplies are expected to commence from Q4FY2022 onwards.
 Return on Capital Employed
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 Gross Margins

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 EBITDA Margins
EBITDA Margins (Margins to expand by 400-600 bps in
the next 3 years)

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 Product
Lumpy Nature
Concentration Risk
of Business

End User
Deferment of
Industry
Capex
Slowdown

Risk of Fire

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"Risk comes from not knowing what

you are doing"- Warren Buffett
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 A Growing Size of the Opportunity

Increasing Application of Fluorine:

The global fluorochemicals market was US$16.9bn in 2016 and is
expected to grow at a CAGR of 5.2% to US$26.7bn by 2025.
30% of all pharmaceutical drugs and agrochemicals today contain
fluorine. This proportion is projected to continue to grow in years to
come.
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Fluorine increases the efficacy of drugs by increasing its selectivity,
enabling it to dissolve in fats and decreasing the metabolizing speed.
Fluorine is gaining traction across industries and has applications in
growing end-user industries like electronic, wet chemicals, and
semiconductor gases.
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 Entry Barriers
There are many CRAMS companies but Navin is a differentiated player due
to its fluorination capabilities. Globally, there are not many companies
which have fluorination capabilities. 

Only company which can do fluorination in the cGMP environment in

India. School of Intrinsic Compounding
Domain expertise in fluorine chemistry.

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 Application of Specialty
Fluoro-intermediates
End User Application:
Generic Pharma drugs
Agrochemicals
Pigments & Dyes School of Intrinsic Compounding
Personal care

Polymers

Flavours & Fragrances

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 Key Products in Speciality
Chemicals
Product Portfolio of 48-50 Products

2 ,4 -Difluorobenzyl Amine Pharmaceuticals

2 -Amino-Benzotrifluoride Crop protection/Pharmaceuticals/Splty Pigment/Dyes

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2 -Fluoro Nitrobenzene Pharmaceuticals
2,3,5,6 -Tetra Fluorobenzyl Alcohol Crop Protection/Personal Care
2,4- Difluorobenzoicacid Pharmaceuticals
2- Bromo Fluoro Benzene Pharmaceuticals
2- Fluoro Aniline Pharmaceuticals
2- Fluoro Phenol Crop protection/Pharmaceuticals

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 Key Products in
Inorganic Fluorides

Product Portfolio of 8-10 Products

Hydrofluoric Acid: Potassium Fluoride: Sodium Fluoride:
Application: It is used as Application: In Application: Sodium
a catalyst in oil refineries, pharmaceuticals & fluorides are used in tin
glass & metal etching, agrochemical plates, toothpaste &
synthesis of intermediates, foundry pharmaceutical
fluorocarbons, flux & intermediates. intermediates.
production of Toothpaste

ammonium fluoride etc.

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 Joint-Venture with
Piramal

Joint-Venture with Piramal

Navin has entered into a JV agreement with Piramal to manufacture
specialty fluorochemicals for Piramal's healthcare segment.
It's a new product & new technology for Navin.
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Navin owns a 49% stake and Piramal owns the remaining 51%. Navin
supplies the critical raw materials to the JV and Piramal buys out the
entire product produced by the JV.

Asset turns of 1x & initial investment of 140 crores.

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 Key Raw Materials &
Value Chain

Fluorspar
+ Sulphur
= Hydrofluoric Acid

The base starting

material for every
product in Navin's
Product Portfolio
Sulphur, Fluorspar, Chloroform & Boric Acid.

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 Revenue Break-up:
Legacy Business vs Value Added

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 Business Direction

Business Direction
Capex at Dewas for CRAMS, cGMP3 of 115 crores to generate sales
worth 230 - 270 crores (2-2.25 Asset Turns)

Capex of 450 crores for both speciality chemicals and refrigerant

business.

Capex of 435 crores in HPP segment.

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 Valuations

Valuation Assumptions:

EBIT expansion of 400 bps.

Sales growth of 20% + in the next 4 years

Valuation band of 1600-1800 & Discount rate of 12%

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