Neutral Navin Fluorine International; target of Rs 9460: Motilal Oswal

What happened

Motilal Oswal said Navin Fluorine International had a strong second quarter, with revenue up 57% from a year earlier across all business segments. It kept a Neutral rating and a target price of Rs 9,460.

Confirmed

Global impact / market context

A Neutral rating with a target price means the broker sees limited extra upside from current levels. Its forecasts of strong growth in revenue, operating profit and adjusted profit still may not justify paying about 37 times estimated future earnings per share, which is the profit attributable to each share.

Analyst inference

The report points to pricing actions and operating efficiencies lifting profit faster than sales. Higher revenue and profit can support cash available for capital spending, which means money put into long-term assets. The rating suggests investors already price much of this growth into the stock.

Analyst inference

What to watch

1. The report expects average yearly growth of 31% in revenue, 32% in EBITDA and 35% in adjusted profit over the next two years. EBITDA is a profit measure before interest, tax, depreciation and amortisation. Confirmed
2. Motilal Oswal values the stock at 40 times its estimated future earnings per share of INR236 to reach its target price of Rs 9,460, so watch whether later earnings estimates move toward or away from that figure. Proposed
3. Watch whether pricing actions and operating efficiencies keep lifting profit faster than sales. If they fade, costs could rise relative to revenue and weaken the case for the growth assumed in the target price. Analyst inference

Evidence

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