FLUOROCHEM - Gujarat Fluorochemicals Limited Share Price

Management of Gujarat Fluorochemicals Limited (GFL) provided an optimistic outlook during the Q1 FY26 earnings call, highlighted by strong segment performance and future growth expectations.

1. Revenue Growth: The Chemical segment reported a 9% increase in revenue to Rs. 1,280 crores, while consolidated revenue stood at Rs. 1,281 crores, up 5% YoY. Management is targeting a 25% growth in the Fluoropolymers segment for FY26, driven by increasing sales from new polymer applications in sectors such as semiconductors, aerospace, and automotive.

2. EBITDA Performance: The Chemical segment achieved an EBITDA of Rs. 354 crores, marking a 33% YoY increase, with an expanded margin of 28%. Consolidated EBITDA grew by 31% to Rs. 344 crores, with margins improving to 27%.

3. Commercial Production of R32: The company is set to start commercial production of R32 refrigerant in Q2 FY26, with plans to ramp its capacity to 20,000 metric tons by the end of FY26. This development is expected to generate significant revenue.

4. Battery Chemicals Growth: Management emphasized the emerging potential of the Battery Chemicals segment, driven by increasing demand for energy storage systems and the impact of new US legislation offering USD 45 per kilowatt hour subsidies for energy storage. The demand from sectors such as AI, electric vehicles, and renewable energy is projected to bolster this business.

5. Working Capital Improvements: Working capital days have decreased from 188 to 172, with continuous efforts to optimize further.

6. Market Positioning: GFL's existing capacities and qualifications position it well to capture market opportunities arising from the exit of a legacy player, with expected improvements in pricing and demand.

Overall, management remains confident about achieving sustained growth and increasing its market share across various segments throughout FY26 and beyond.

Question 1: "Is this run rate sustainable? And what visibility do you see in the volumes for the rest of FY '26 in the upcoming quarters?"

Answer 1: "We expect the fluoropolymer business to achieve a 25% growth, continuing through this financial year. We anticipate consistent revenue growth quarter by quarter for the fluoropolymer segment."

Question 2: "Can you elaborate on the customer approval pipeline for the new high-purity polymer, especially for semiconductors and aerospace applications?"

Answer 2: "We've received several high-end polymer approvals from both Western and Far East countries for semiconductor and aerospace applications. We expect to see these numbers ramping up each quarter as we gain more approvals."

Question 3: "On the R32, can you help us understand what capacity was added by retrofitting the existing plant?"

Answer 3: "We aim to reach a capacity of 20,000 tons for R32 by the end of this financial year through retrofitting. The first shipment has already been made to customers. Further capacity expansion will depend on market opportunities."

Question 4: "What is the expectation on R32 pricing? Is there a risk of it normalizing?"

Answer 4: "We expect R32 prices to remain firm due to supply constraints. While it's difficult to project, we believe the pricing will continue to be stable compared to past fluctuations in R125 pricing."

Question 5: "How is the battery chemical business evolving in light of the market shift towards energy storage?"

Answer 5: "There's a positive pivot towards energy storage applications, where LFP chemistry is increasingly used. We are well-positioned for growth due to our established presence and ongoing validations of our products in the market."

Question 6: "What progress is being made on developing new capacities, specifically regarding the proposed Rs. 1,200 crores in EV investments?"

Answer 6: "We plan to invest Rs. 1,200 crores in the EV segment this year, and that effort remains on track. We've already invested Rs. 1,300 crores in the previous financial year and expect to ramp up EV capacities significantly moving forward."

Question 7: "Will you consider manufacturing facilities or JVs in the United States for a more resilient supply chain?"

Answer 7: "Currently, we are not exploring JVs or manufacturing facilities in the U.S. We have optimized our integrated facility in India, and the current setup meets our needs effectively."

These six questions and answers summarize the key inquiries and responses from the earnings transcript, providing insights into Gujarat Fluorochemicals Limited's strategic outlook and operational developments.