Deven Choksey Research has issued an "ACCUMULATE" recommendation for Navin Fluorine International Ltd, setting a target price of Rs 5,075 from the current market price of Rs 4,663, indicating an 8.8% upside potential. The specialty chemicals company delivered an outstanding Q1FY26 performance with revenue surging 38.5% year-on-year to Rs 7,254 million, while EBITDA margins expanded dramatically to 28.5% from 19.2% in the previous year. The research house cites robust growth across all three business segments—High-Performance Products, Specialty Chemicals, and CDMO—as key drivers for sustained momentum in the coming quarters.

Research House Maintains Bullish Stance Despite Premium Valuation

Deven Choksey Research has reaffirmed its ACCUMULATE rating on Navin Fluorine International Ltd (NFIL), projecting significant expansion potential despite the stock trading at premium valuations. The research entity has established a target price of Rs 5,075, representing an 8.8% appreciation from the current trading level of Rs 4,663. This recommendation comes on the heels of exceptional quarterly results that exceeded analyst expectations across multiple operational metrics.

The institutional research firm has rolled forward its valuation methodology to June 2027, applying a 42.0x price-to-earnings multiple on projected earnings. This valuation framework reflects confidence in the company's ability to sustain elevated growth trajectories across its diversified portfolio of fluorine-based specialty chemicals and pharmaceutical intermediates.

Exceptional Quarter Driven by Margin Expansion Excellence

Navin Fluorine's Q1FY26 financial performance demonstrated remarkable operational efficiency, with revenue climbing 38.5% year-on-year to Rs 7,254 million, marginally exceeding analyst projections by 1.6%. The sequential growth of 3.5% quarter-on-quarter indicates sustained business momentum despite challenging market conditions.

The most striking aspect of the quarterly results was the EBITDA margin expansion of 934 basis points year-on-year, reaching 28.5% compared to 19.2% in the corresponding period last year. This dramatic improvement was primarily attributed to enhanced operational leverage, favorable pricing dynamics, and stringent cost optimization initiatives implemented across manufacturing facilities.

Net profitability witnessed an extraordinary surge of 128.8% year-on-year to Rs 1,172 million, significantly surpassing analyst estimates by 10.1%. The diluted earnings per share expanded to Rs 22.8 from Rs 10.0 in the previous year, reflecting the company's ability to translate top-line growth into substantial bottom-line improvements.

High-Performance Products Segment Emerges as Growth Champion

The High-Performance Products division demonstrated exceptional resilience, generating revenue of Rs 4,070 million with robust growth of 44.8% year-on-year and 24.8% quarter-on-quarter. This segment's success was primarily driven by the R32 refrigerant facility, which achieved optimal utilization following its commercialization in March 2025.

Management indicated engagement in advanced discussions with international partners to scale up R32 capacity, potentially capitalizing on the company's full quota-based entitlement of approximately 26,000-27,000 metric tons. This strategic expansion is being pursued through a calibrated approach, ensuring commercial prudence and risk mitigation through long-term customer partnerships.

The much-anticipated Anhydrous Hydrogen Fluoride (AHF) project with an investment outlay of Rs 4,500 million is progressing steadily, with commissioning targeted for Q2FY26 completion. The company has secured an exclusive partnership with Boost Chemtech AG, Switzerland, to jointly commercialize electronic-grade HF, positioning NFIL strategically in the advanced materials segment.

Specialty Chemicals Division Navigates Market Headwinds

The Specialty Chemicals segment reported revenue of Rs 2,190 million, registering 35.2% year-on-year growth despite experiencing a 15.4% sequential decline. The division is poised to initiate commercial supplies for three new fluoro molecules in Q2FY26, including two innovative AI molecules and one fluoro molecule, supported by validated customer orders.

The Rs 5,400 million fluoro specialty project at Dahej, commissioned in December 2024, is expected to contribute meaningfully to FY26 performance. Additionally, the company has entered a strategic partnership with Chemours to manufacture "Opteon," a proprietary two-phase immersion cooling fluid, aligning with the broader foray into high-growth advanced material applications.

Management acknowledged that while inventory stacking issues have been resolved, intense competition from Chinese manufacturers continues to pressure pricing dynamics. However, volume recoveries are anticipated in H2FY26, supported by stronger inquiries and a robust order book providing full fiscal year visibility.

CDMO Business Accelerates Toward USD 100 Million Milestone

The Contract Development and Manufacturing Organization segment delivered revenue of Rs 990 million, achieving 22.2% year-on-year growth despite a 13.9% sequential decline. The division continues demonstrating strong traction backed by a robust order book ensuring healthy revenue visibility for FY26.

Phase 1 of the cGMP4 expansion involving Rs 1,600 million of the planned Rs 2,880 million capital expenditure is progressing on schedule, with commercialization expected by Q3FY26. Phase 2, involving Rs 1,280 million, will be initiated once customer visibility improves, ensuring disciplined capital deployment aligned with demand ramp-up.

Customer momentum remains encouraging, with confirmed material orders from leading European innovators for Q2FY26 delivery, scale-up orders from other EU majors, and commercial orders from U.S. clients scheduled for FY26 delivery. The CDMO business is strategically positioned to achieve the USD 100 million revenue milestone by FY27, representing a significant growth trajectory.

Aggressive Capital Expenditure Framework Signals Expansion Ambitions

Navin Fluorine has outlined an ambitious capital expenditure roadmap across key business verticals, with total guidance for FY26-FY27 revised upward to Rs 7,000-10,000 million, compared to the earlier range of Rs 5,000-6,000 million. This enhanced investment framework reflects management's confidence in sustained demand visibility and market opportunity expansion.

Investment Thesis and Risk Assessment

The research house has revised PAT estimates for FY26E/FY27E upward by 1.4%/2.3% respectively, factoring in higher EBITDA margins driven by improved operating leverage, enhanced capacity utilization, and cost optimization programs. The revenue CAGR between FY25-27E is projected at 25.0%, while adjusted PAT CAGR is estimated at an impressive 43.2%, underscoring the company's exceptional growth trajectory and operational efficiency improvements.