HDFC Securities

GFL (Buy)

CMP: ₹393.95

Target: ₹494

Gujarat Fluorochemicals commenced commercial operations in 1989. GFL attained a key milestone in 2007, when it commissioned India’s largest PTFE plant. PTFE is an extremely specialised engineering plastic, and only a select few firms the world over have the technology for PTFE manufacture. It has interests in multiplex, wind turbine generator and renewable energy businesses through subsidiaries.

Wind power business is on expansion phase. Inox Wind (75 per cent subsidiary — balance held by promoters) intends to tap the IPO market through primary and secondary equity shares to get benefits of listing. Chemicals business — expansion and forward/ backward integration of chemical complex (including PTFE and derivatives) is a key trigger, which could help in improving margin and capacity utilisation of chemical plant. Inox Leisure to continue to do well on the back of expansion, higher spending by consumers, low entertainment tax for new multiplex and higher tickets and food and beverage revenues.

Concerns: a) Debt-funded capital expenditure plan for its windmill power projects; b) End of carbon credit revenues since 2013 need to be replaced by recurring growing revenue streams; c) Forex fluctuations.

(This article was published on May 23, 2014)
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