- Fluoropolymers segment up 14% YoY, primed for post‑tariff acceleration.
- Fluorochemicals sales plunged 33% YoY due to R22 quota cuts and R125 tariffs.
- Battery chemicals entered the topline; LiPF₆ will be the first real driver in FY27.
- Current market pricing at 40× FY28E EPS versus our 45× target implies upside.
- Sector peers (Tata Chemicals, Adani) are repositioning around similar tariff dynamics.
You missed the tariff reset—now Gujarat Fluorochemicals could sprint ahead.
Why Fluoropolymers Growth Could Ignite Gujarat Fluorochemicals' Earnings
The fluoropolymers business posted a 14% year‑on‑year revenue lift, a signal that the segment has cleared the most painful part of the US tariff cycle. While the quarter showed a modest 2.6% dip due to the European and US holiday slowdown, analysts expect a strong rebound once demand normalises. PTFE, the only polymer exempt from the tariffs, already enjoys price stability, and the removal of duties on new fluoropolymers unlocks pricing power across the product suite. The R32 plant, which started operations this month, will scale to 20,000 mtpa by Q2 FY27, adding a high‑margin line that dovetails with the expanding automotive and refrigeration markets.
The Drag from Fluorochemicals Segment: R22 and R125 Under Pressure
The fluorochemicals arm suffered a 33% YoY collapse, driven primarily by a sharp fall in R22 sales. International quota reductions, coupled with seasonal demand weakness, throttled volumes. R125, another refrigerant, bore the brunt of US anti‑flurocarbon duties, further eroding top‑line. While the segment’s quarterly performance improved 6.3% thanks to better pricing on bulk chemicals, the overall trajectory remains negative until the tariff environment stabilises and new product pipelines mature.
Battery Chemicals – The Long‑Game Play and LiPF₆’s Role
Gujarat Fluorochemicals entered the battery chemicals space in FY26, with LiPF₆ earmarked as the first meaningful revenue contributor in FY27. Although the unit’s contribution to the consolidated topline is modest now, the global lithium‑ion battery boom offers a multi‑year runway. Analysts project FY27‑FY28 as the growth window, assuming capacity ramps and successful integration with battery manufacturers. However, the timeline may slip if raw‑material costs or regulatory hurdles intensify.
Valuation Lens: 40× FY28E EPS vs Our 45× Target – What It Means
The stock trades around 40× FY28 estimated earnings per share, while our internal model applies a 45× multiple, yielding a price target of Rs 3,434. The premium reflects confidence in the post‑tariff earnings uplift and the battery chemicals upside. A simple discounted cash flow (DCF) using a 10% weighted average cost of capital (WACC) and a 4% terminal growth rate aligns closely with the 45× multiple, reinforcing the “hold” recommendation. Investors should monitor the EPS trajectory and any deviation in the tariff landscape, which could quickly re‑price the multiple.
Sector Ripple Effects: How Global Tariff Shifts Reshape the Fluoropolymer Landscape
Across India, peers such as Tata Chemicals and Adani Total Gas are watching the US tariff resolution closely. Tata’s fluoropolymer division, which relies heavily on exports, is already revising its pricing strategy to capture margin expansion. Adani’s recent acquisition of a specialty chemicals plant positions it to benefit from the same demand tailwinds. The broader industry sees a shift from cost‑containing strategies toward margin‑enhancing product innovation, especially in high‑growth refrigerants and polymer applications for EVs and renewable energy storage.
Investor Playbook
Bull Case:
- Full tariff relief triggers a 20‑30% earnings uplift in fluoropolymers by FY28.
- R32 plant reaches full capacity on schedule, adding ~₹1.2 bn of incremental revenue.
- LiPF₆ ramps faster than consensus, delivering a 15% contribution to FY27 earnings.
- Market undervalues the upside; stock re‑rates toward 45× FY28E EPS.
Bear Case:
- Residual US trade friction re‑imposes duties on newer fluoropolymers.
- Battery chemicals rollout delayed, LiPF₆ sales fall short of FY27 guidance.
- Raw‑material price spikes erode margin recovery in bulk chemicals.
- Sector peers capture market share, leaving Gujarat Fluorochemicals with stagnant growth.
In summary, the resolved US tariffs unlock a clear earnings catalyst for Gujarat Fluorochemicals, but execution risk remains in the battery chemicals arena. We maintain a Hold stance, with upside potential if the fluoropolymers rebound as anticipated.