Gujarat Fluoroch

Gujarat Fluorochemicals reported a robust Q1 FY26, with consolidated revenue increasing 5% year-on-year to ₹1,281 crores and PAT surging 70% year-on-year to ₹184 crores. The consolidated EBITDA grew 31% to ₹344 crores, expanding margins to 27% from 22% in Q1 FY25. The Chemical segment was a key driver, with revenue up 9% YoY to ₹1,280 crores, EBITDA growing 33% YoY to ₹354 crores, and PAT increasing 69% YoY to ₹196 crores. Working capital days were reduced from 188 to 172 days, reflecting management's focus on efficiency.

The fluoropolymer segment achieved its highest-ever quarterly revenue and is targeted to grow 25% by the end of FY26, with optimal capacity utilization expected by the same period. This growth is driven by new polymer sales volumes and approved qualifications for high-end applications in sectors like semicon, aerospace, and automobiles. Management expressed confidence in sustaining this growth momentum quarter-on-quarter, noting that demand for specialized new fluoropolymers is inelastic to price changes.

The company commenced commercial production of R32 in Q2 FY26, several quarters ahead of schedule, achieved through strategic retrofitting with minimal capital expenditure. GFL aims to ramp up R32 capacity to 20,000 metric tons by the end of FY26, contributing to a complete range of refrigerant products including R22, R32, R125, and R410. Management expects R32 capacity utilization to happen quickly and believes pricing will remain stable due to unique market fundamentals and supply constraints.

The Battery Chemicals segment is identified as a cornerstone for future growth, benefiting from global demand for battery energy storage, AI/ML workloads, and EV infrastructure. US subsidies of $45 per kilowatt-hour for battery manufacturing, coupled with supply chain diversification requirements (85% non-PFE inputs), present a significant opportunity. The company has operational electrolyte and salt plants, and its LFP CAM plant has completed pre-commissioning, with sales expected to trickle in by H2 FY26 and show meaningful numbers in FY27.

GFL has invested approximately ₹1,300 crores in the EV segment until the last financial year and plans to add another ₹1,200 crores in FY26. The company has also invested ₹190 crores in equity for a 450-megawatt renewable energy project, with savings expected to accrue from Q3 FY26 and full benefits realized in FY27. PVDF capacity for EV binders is in place, with qualifications anticipated to be complete by the end of the calendar year, supporting the growing battery materials business.

While new US tariffs of 25% apply to a few new fluoropolymers, management believes the impact will not be significant due to the specialized nature and inelastic demand for these products, and exemptions for PTFE, micro powders, and most battery materials. The company emphasized its focus on its highly integrated manufacturing facility in India for fluoropolymers, stating it is not currently evaluating JVs or manufacturing facilities in the US, as its Indian operations are optimized for cost and processes.