FLUOROCHEM - Gujarat Fluorochemicals Limited Share Price

Management outlined a positive outlook for Gujarat Fluorochemicals Limited (GFL) for FY26, projecting significant growth across key segments. They reported Q4 FY25 revenues at INR 1,225 crores, representing an 8% year-on-year increase. Furthermore, EBITDA surged by 28% to INR 305 crores, with margins improving from 21% to 25%. Consolidated PAT nearly doubled to INR 191 crores for the quarter.

Key forward-looking points include:

1. Growth in Fluoropolymer Segment: Management indicates a 25% growth expectation in the Fluoropolymer sector, driven by increased volume in high-value grades and stable pricing.
2. Battery Materials Business: GFL holds a first-mover advantage in the non-Chinese battery materials market, with projected capex of INR 1,600 crores for FY26, including INR 1,200 crores specifically for the battery materials sector.
3. Capacity Expansions: The company is advancing in capacity expansions for its LFP (Lithium Iron Phosphate) and electrolyte plants.
4. Debt Reduction: Net debt decreased to INR 1,451 crores from INR 1,769 crores year-over-year, improving the net debt-to-equity ratio from 0.3 to 0.2.
5. Demand Outlook: Expecting robust demand for LiPF6 salt, with production stabilization and regulatory approvals for various products anticipated to bolster revenue.

The management emphasized focusing on long-term contracts and building inventory in anticipation of demand spikes, particularly in the battery materials sector, which they believe will contribute significantly to revenue growth. Overall, GFL is optimistic about sustaining growth and creating long-term stakeholder value.

1. Question: "Do we have a confirmed order? Or do you think it's more of an anticipation and projection, which is leading to a bump up in the inventory level at our end?"

   Answer: We have a solid order book for Fluoropolymers driving our inventory buildup. Similarly, for the EV battery materials, we have long-term projected demands. Therefore, we are proactively filling our pipelines based on confirmed needs.

2. Question: "Why are we going ahead with Phase 2, Phase 3 kind of capacity addition where we are yet to sign a long-term contract?"

   Answer: Anticipated demand from customers already supports our capacity plans. Delays can occur while approvals happen, but building capacity takes time. Hence, we're expanding now to meet future requirements confidently based on market projections.

3. Question: "Are we still confident on the guidance of achieving INR2,000 crores EBITDA in FY '26?"

   Answer: Yes, we're confident. We predict strong growth in Fluoropolymers"”around 25% this year. As we continue to see progress in our core business, we believe this trajectory will lead to our EBITDA targets.

4. Question: "Does this include Fluoropolymers as well? And do you see a sizable contribution from the EV subsidiary in FY '26?"

   Answer: The INR400 crores capex will largely enhance Fluoropolymers. For the EV business, we expect revenue to gradually trickle in during FY '26, ramping up further in FY '27, but it won't be substantial immediately due to development stages.

5. Question: "In terms of the competition with EV projects, what are the key risks?"

   Answer: The fundamentals for EV growth remain strong, driven by a green agenda. The key risk lies in timing"”how quickly the market evolves. However, we don't foresee major obstacles in reaching our projected targets.

6. Question: "Can you give an insight into R-22 pricing trends and R-32 timelines?"

   Answer: R-22 pricing is improving and expected to offset quota cuts due to pricing benefits. For R-32, we aim for commercialization in the second half of FY '26, exploring options to expedite the rollout based on market opportunities.

7. Question: "What are the expected annual savings from the captive power plant?"

   Answer: Annual savings from the captive power plant are projected to be INR120-150 crores, gradually coming into effect as facilities come online. Initial savings will trickle in this financial year as the setup progresses.

8. Question: "How will the overall capital work progress be segmented?"

   Answer: The current capital work in progress is consolidated and involves various ongoing projects, including those related to the battery business. Specific project completions will dictate capitalizations in accounting.

9. Question: "Where do you expect stronger demand"”US or Europe"”for the EV segment?"

   Answer: We anticipate stronger growth in the US market as opposed to Europe. Our focus is on engaging with US companies and leveraging existing relationships while also developing the Indian market.

10. Question: "What are the key drivers for the growth in Fluoropolymers?"

    Answer: New Fluoropolymers largely drive current growth. We have anticipated demand which is now materializing, offering us the opportunity to fill the capacity we've built up while also seeing benefits from consolidation among legacy players.