Navin Fluorine International Limited Q4 FY23 Earnings Conference Call Insights

Key highlights from Navin Fluorine International Limited (NAVINFLUOR) Q4 FY23 Earnings Concall

Management Update:

• [00:06:27] NAVINFLUOR said that highest-ever quarterly revenues and profitability were achieved by all of its business units: specialty, HPP, and CDMO.

Q&A Highlights:

• [00:13:39] Sudarshan Padmanabhan from JM Financial asked about the outlook for the agrochemicals market and how NAVINFLUOR is positioned to weather any potential challenges. Radhesh Welling MD NAVINFLUOR has not seen a significant impact on pricing or inventory in its specialty business, and has developed new opportunities to compensate for the volume lost in the last quarter.

• [00:16:44] Sudarshan Padmanabhan from JM Financial enquired if there will be more opportunities to scale up production of HFOs for Honeywell or other customers in the coming year. Radhesh Welling MD said that NAVINFLUOR’s priorities for 2023 are to stabilize the plant, debottleneck production, and identify new molecules to work with Honeywell on.

• [00:20:36] Abhijit Akella from Kotak Securities asked about the normalized depreciation and amortization number going forward. Anish Ganatra CFO said the annualized impact of the new depreciation rates would be in the range of INR80-90 crores.

• [00:20:56] Abhijit Akella from Kotak Securities also asked about the sharp increase in other expenses. Anish Ganatra CFO said that the expenses for the current year are not comparable to the previous year because the NFASL plant was not operational in the previous year. Also, there were two one-time expenses in Q4 totaling INR15 crores, which will not be repeated in future quarters.

• [00:24:15] Abhijit Akella from Kotak Securities asked about the growth outlook for the three business units in FY24. Radhesh Welling MD replied that NAVINFLUOR does not currently expect any changes to its qualitative guidance for FY24.

• [00:24:49] Abhijit Akella from Kotak Securities enquired that with the commissioning of the R32 unit and the entry of new competitors, how will pricing in the R32 segment perform in the near-term and medium-term. Radhesh Welling MD answered that NAVINFLUOR believes that the pricing for R32 will remain strong in the next 2-3 years due to limited capacity and increasing demand.

• [00:33:24] Vivek Rajamani from Morgan Stanley asked if the company anticipated increase in volumes and improved margins in 4Q23, indicating a new normal for future performance. Radhesh Welling MD said that the annualized margins should be considered to track improvements over time due to the combined performance of all business units, while commenting on QonQ fluctuations and future margin increases may be difficult.

• [00:34:04] Vivek Rajamani from Morgan Stanley asked for more information about the molecule experiencing slowdown and any other areas of risk in the portfolio for FY24 and FY25. Radhesh Welling MD said that the impact of the specialty molecule was mostly felt in 4Q23, and it is anticipated to diminish as demand rebounds, with its significance already accounted for in the previous quarter’s results.

• [00:43:02] Sanjesh Jain from ICICI Securities asked has the $16 million contract announced in 3Q for the CDMO business started to be implemented, and if so, what impact has it had on the 4Q performance of the CDMO business. Radhesh Welling MD said a significant part of the order that was discussed in 3Q was supplied in 4Q, with the remaining balance to be supplied in FY24.

• [00:44:01] Sanjesh Jain from ICICI Securities asked that with the debottlenecking of cGMP 3, is a 20% plus revenue growth in FY24 a reasonable assumption. Radhesh Welling MD replied that NAVINFLUOR is confident of its growth in FY24 and in the years to come, which is why it is investing in cGMP 4.

• [00:49:04] Rohit Nagraj at Centrum Broking asked about ESOPs, after ESOP charges of FY23, how much is left and will come in FY24, FY25. Radhesh Welling MD said that the ESOP charge for FY24 is expected to be 31%, and will progressively come down in the following years.

• [00:53:33] Krishan Parwani at JM Financial asked what is NAVINFLUOR’s current R&D focus in terms of products, particularly derivatives of Triflic acid or Triflic Anhydride. . Radhesh Welling MD said NAVINFLUOR has invested significantly in its R&D capabilities, with a focus on developing new technology platforms. These platforms can be used to develop a wide range of molecules, which will give NAVINFLUOR a competitive advantage.