Gujarat Fluorochemicals Q1 FY27 earnings call

Gujarat Fluorochemicals reported robust Q1 FY27 results, with consolidated revenue from operations growing 24% year-on-year to INR 1,588 crores. Consolidated EBITDA increased by 24% to INR 428 crores, and consolidated PAT saw a 19% rise to INR 219 crores. The Chemical segment was a primary driver, with revenue up 23% YoY to INR 1,574 crores and EBITDA up 29% YoY to INR 458 crores, demonstrating broad-based growth across core chemical businesses.

The company demonstrated significant improvements in operational efficiency and profitability during the quarter. ROCE improved by 258 basis points to 16.6% in Q1 FY27 compared to 14% in FY26, while ROE expanded by 301 basis points to 15.18% from 12.17% in FY26. Furthermore, working capital days were notably reduced by 43 days, settling at 149 days as of Q1 FY27, reflecting strong capital efficiency and disciplined execution.

The fluoropolymer business experienced healthy growth, with revenue increasing 15% year-on-year and 8% sequentially. This growth was attributed to new-age applications in semiconductors, data centers, electronics, automotive, and green hydrogen, alongside an improved product mix towards higher-value grades. The fluorochemicals segment delivered an exceptionally strong quarter, with revenue surging 52% year-on-year and 44% quarter-on-quarter, primarily due to robust R32 refrigerant sales and healthy growth across the refrigerant portfolio.

GFL is actively expanding its R32 capacity, with commissioning expected in Q2 FY27, to meet growing global demand. The company is also on track to commission its R134A project during the current financial year, which is a brownfield expansion at an existing site. To support these refrigerant expansions and other products, AHF capacity is being added in phases, with the first set expected to be commissioned by year-end or Q3 FY27, enhancing backward integration.

The previously announced USD 216 million battery materials project in Oman has been put on hold and is being relocated to India due to geopolitical reasons and to accelerate execution. This strategic shift means the INR 1,200 crores funding approved from OIA for the Oman project will not be available for the India-based initiative. However, management confirmed that land is available at their Dahej B (Jolva) plant for the first phase of the relocated project, and they will continue to raise funding for these projects without seeing it as a constraint.

Management reiterated a target of 17-20% annual growth for fluoropolymers, driven by volume and high-value products. The battery materials segment is expected to achieve a 3-digit revenue number by Q4 FY27, with significant ramp-up anticipated in FY28 as qualifications are completed. GFL also aims for full utilization of its incremental 20,000 tons of R32 capacity by calendar year 2027, leveraging its integrated manufacturing capabilities and global marketing network.

GFL is strategically capitalizing on changes in the competitive landscape. The impact of 3M's exit from the fluoropolymer market has largely been absorbed, allowing GFL to enter high-end markets previously served by them. Furthermore, with AGC's potential facility shutdown, GFL is receiving inquiries from their customers and expects to see traction in gaining market share in high-end fluoropolymers within the next one to two quarters, as GFL has compatible grades and has initiated qualification processes.