Navin Florine witnesses seven-fold jump in Q4 net profit

The share price of Navin Florine International surged 3.49% to Rs 1,616 as investors queue up to acquire their share of highly profitable company in otherwise dull economic activity.

The Mumbai-based speciality fluorochemicals makers consolidated net profit surged 705.5% to Rs 270.09 crore on 9.5% increase in net sales to Rs 276.57 crore in Q4 March 2020 over Q4 March 2019.

Profit was aided by a minimum alternate tax (MAT) credit reversal of Rs 88.2 crore during the quarter. The company had contested receipts on account of Certified Emission Reduction (CER) as capital receipts not chargeable to tax from financial year 2007-08 to financial year 2012-13.

During the year, it received favourable appellate orders for some of the aforesaid years. Accordingly, the company has now recognized MAT credit entitlement of Rs 73.55 crore under section 115JAA of the Act, for which claims have been made.

The company has recomputed the tax liabilities for these years and written back excess tax provisions amounting to Rs 141.25 crore for earlier years.

The consolidated profit before tax (PBT) jumped 12.6% to Rs 62.88 crore in Q4 March 2020 as against Rs 55.82 crore in Q4 March 2019. Operating EBITDA jumped 33% to Rs 68.80 crore in Q4 March 2020 over Rs 51.60 crore in Q4 March 2019. EBITDA margin improved to 24.9% in Q4 FY20 as against 20.4% in Q4 FY19.

The board has recommended a final dividend of Rs 3 per share. The Government of India announced a nationwide lockdown on 25 March 2020 to contain the spread of the COVID-19 pandemic.

Accordingly, Navin Fluorine International had temporarily suspended manufacturing operations at its facilities at Bhestan, Gujarat and Dewas, Madhya Pradesh after taking safe shut down of continuous and batch manufacturing plants.

After obtaining requisite permissions, as applicable, from concerned government authorities, the company restarted its operations at both the above facilities from 14 April 2020 in a phased manner.

Currently, all the plants manufacturing products for life science and crop science sectors are running to optimum capacities, whereas those for industrial sectors continue to operate at sub-optimum levels.

The company’s specialty chemicals business is witnessing strong traction from pharma, agro and industrial customers, as the segment manufactures niche molecules with a large share going to overseas customers.

With solid growth clocked by this segment the outlook remains strong. For the CRAMS segment, with the commissioning of the cGMP3 plant in December, the company has seen new projects getting signed up and product enquiries coming in.

The management has guided that the full impact will be visible in Q1FY21 with optimal capacity reached in the next three years. Wherein the companys customers include pharma innovator companies based out of Europe and the US.

The company has received its largest ever multi-year deal win. As per management it received a 7 year contract worth USD 410mn (Rs. 2,900cr) to manufacture and supply a High Performance Product (HPP) to a global company.

The revenues will be evenly spread across 7 years (Rs. 410cr p.a.) This is a completely new product for NFIL and the deal win is largest ever won by the company to date.

The management highlighted that the company will be the sole producer of this HPP other than the innovator company that has the patent for this product. Supplies for the product are expected to commence from Q4FY22.

A total investment of USD 51.5mn (Rs. 366cr) would be incurred to set up a dedicated manufacturing plant and a captive power plant for USD 10mn under a separate subsidiary Navin Fluorine Advanced Sciences (NFASL)

Net net we believe that growth momentum will continue for the company going ahead in FY21 while the new order flow effect will partly get reflected in numbers from FY22 onwards ahead.

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