Chemicals Jeffefries Nov21

EQUITY RESEARCH
India | Chemicals
Chemicals
India Chemicals Initiation | Fluorine Power - Prefer 90 Fluorine containing drugs being introduced in
79
NFIL
the market
80
70
58 57
3 November 2021 60
50
Key Takeaway 40
30
32
20
The large pharma and agrochem CDMO opportunity, increasing use of fluorine in new 20
17
11
products and slowdown in Chinese fluorochem revenues due to tightening climate 10 0

0
goals position Indian players with fluorochem expertise and strong balance sheets
1940-49
1950-59
1960-69
1970-79
1980-89
1990-99
2000-09
2010-19
well for growth. We initiate on Navin Fluorine at Buy, owing to accelerating earnings
.
and optionality from new product wins, and SRF at Unpf, as its valuation ignores
impending slowdown in earnings growth, in our view. Breakdown of
agrochemical
Large opportunity, increased salience of fluorine, innovators looking beyond China: compounds
Global synthetic pesticides market is projected to grow at 5% Cagr to US$ 71bn by 47%
53%
2024; the global small molecule CDMO market is projected to grow at 10% Cagr to Not Containing
Fluorine
US$ 61bn by 2025. Fluorinated compounds have found increased use in new drugs/
Containing Fluorine
pesticides owing to higher efficacy with their share at 37%/67% in the past five years.
China's policy on climate goals has impacted the smooth functioning of its chemical .
This report is intended for Jefferies clients only. Unauthorized distribution is prohibited.
industry. Chinese fluorochem majors have witnessed revenue decline over CY18-20 NFIL EBITDA CAGR (%)
30% 26.9%
while Indian players have witnessed strong growth suggesting mkt share shift to
25%
India.
20%
The winning framework: Our interaction with innovators suggest they evaluate 15% 12.9%
prospective partners on tech capability, quality and reliability of production process, 10%
cost, size, potential to scale and safety. To this, we add balance sheet strength and 5%
good capital allocation. Navin Fluorine (NFIL) and SRF - with recognized expertise in 0%
fluorochemistry - tick most of the boxes, in our view. . FY 18-21 CAGR FY 21-24E CAGR
Initiate NFIL at Buy: NFIL with its technical expertise in fluorine, accelerated capex SRF EBITDA CAGR (%)
program, augmented capabilities to handle growth and strong balance sheet is well 35% 33.0%
positioned to capture the growth opportunity in pharma/agrochem CDMO, in our 30%

view. c60% exposure to pharma in high value business makes it less exposed to 25%
the agrochem cycle. New product breakthroughs (like HPP) have disproportionate 20% 16.1%
positive impact on growth given its smaller revenue base. Accelerating earnings 15%
growth and optionality from new product wins drive our Buy rating with a PT of Rs 10%
5%
3,840 - at 48x fwd PE. We note Divi's and PI Ind's mkt caps have increased 13 and 14
0%
times in the past decade, as their profits compounded at 17% and 27%, respectively, FY 18-21 FY 21-24E
.
over the period.
Source: Jefferies estimates, company
Initiate SRF at Unpf: SRF's technical expertise in fluorine chemistry, widening data, I-Science, MDPI
portfolio of specialty chem molecules, aggressive capex with room to improve
utilization in existing facilities and a strong balance sheet position it well for growth,
in our view. However, c90% exposure to agro chem in specialty chemicals makes
it susceptible to a slowdown in the global agro chem cycle. Packaging films and
technical textiles are at cyclical peak margins, and we expect a reversal over
FY22-24E. We forecast 20% PAT Cagr over FY21-24E compared to 37% over FY18-21.
Initiate at Unpf with PT Rs 1,890, as the current valuation ignores the impending Bhaskar Chakraborty *
slowdown in earnings growth in our view. We await a better entry point. Equity Analyst
+91 22 4224 6113
Key risks: Raw material inflation is expected to hit margin in FY22E but aid FY23E bchakraborty@jefferies.com
due to lag effect, global agrochem slowdown, reversal of cycle-high margins in Pratik Chaudhuri, CFA *
commodity part of the businesses. Equity Analyst
+91 22 4224 6123
pchaudhuri@jefferies.com
Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on
pages 59 to 64 of this report.
* Jefferies India Private Limited
EQUITY RESEARCH
India | Chemicals
Summary of Changes
Price EPS Estimates P/E
Company Ticker Rating Price
Target 2021 2022 2023 2021 2022 2023
NFIL NFIL IN BUY INR3,361.50 INR3,840 INR52.02 INR52.71 INR69.93 64.6x 63.8x 48.1x
SRF SRF IN UNPF INR2,123.30 INR1,890 INR40.44 INR55.44 INR61.14 52.5x 38.3x 34.7x
3 November 2021 2
Please see important disclosure information on pages 59 - 64 of this report.
EQUITY RESEARCH
India | Chemicals
Table of Contents
Executive Summary........................................................................................................ 4
Story in Exhibits............................................................................................................ 8
Navin Fluorine | Initiate with a Buy.................................................................................... 10
SRF | Initiate with Underperform...................................................................................... 12
Industry Overview......................................................................................................... 14
Navin Fluorine: Preferred pick..........................................................................................20
Technical expertise in fluorine.................................................................................. 21
Long growth runway in CRAMS................................................................................. 22
Specialty chemicals benefiting from agrochem revival..................................................... 23
Portfolio less prone to cycles................................................................................... 24
Multi-fold ramp up in capex..................................................................................... 24
Augmenting capabilities to handle the growth ahead....................................................... 25
New product breakthrough opens door to similar opportunities.......................................... 26
Disproportionate earnings impact as such opportunities fructify......................................... 27
Legacy business contribution will continue to shrink....................................................... 27
Balance sheet strong............................................................................................. 28

Valuation - accelerating earnings with potential upside optionality, initiate at Buy.................... 29
Case Study: Divi's Laboratories................................................................................. 31
Case Study: PI Industries........................................................................................ 32
Key risks to our price target..................................................................................... 33
SRF: Quality business at peak margins, earnings growth to slow............................................... 38
Expertise in Fluorine chemistry................................................................................. 39
Widened specialty chemical portfolio via R&D............................................................... 40
Undertook capex in anticipation of business that helped it capture growth but depressed ROA..... 41
Entering new product segment.................................................................................. 42
Agro chem is 90% of specialty chem revenues, susceptible to cycles................................... 43
Refrigerant gases: Strong growth with firm margins, HFC phase out in US medium term risk....... 43
New gen refgas technology could cushion long-term impact..............................................45
Packaging films: Low-cost producer close to its customers, margins at cycle high................... 45
Technical textiles: In a sweet spot but margins should mean revert..................................... 47
We expect non-specialty chemical margins to mean revert over FY22-23E............................. 47
Expect growth to remain healthy but margins to compress on mean reversion in cyclical
businesses.......................................................................................................... 48
Valuation - await better entry point, Initiate at Unpf........................................................ 50
Key risks to our price target..................................................................................... 51
3 November 2021 3
EQUITY RESEARCH
India | Chemicals
Executive Summary

Large specialty chemicals opportunity, increased use of Fluorine: Global synthetic
pesticides market is projected to grow at 5% Cagr to US$ 71bn by 2024; the global
small molecule contract development and manufacturing organization (CDMO) market
is projected to grow at 10% Cagr to US$ 61bn by 2025 (Source: Asymchem DRHP, Tatva
Chintan DRHP). Innovators have focused on R&D and marketing while gradually moving
away from deploying capital in manufacturing while increasing outsourcing to low-cost
geographies like China and India. Fluorinated compounds have found increased use in
new drugs/pesticides owing to higher efficacy with their share at 37% of new drugs and
67% of new agrochemicals in the last 5 years.
Difficult chemistry, only a handful have expertise: The complexity of fluorine chemistry
has increased with up to six fluorine atoms in a molecule. Only a handful of global
players have technical expertise in fluorochemicals.
China’s tightening climate goals impacts its chemicals industry: China's policy on
climate goals has impacted the smooth functioning of its chemical industry. Among the
19 provinces that were earmarked by NDRC as having missed their climate goals, three
are major chemical hubs. Chinese fluorochem majors have witnessed revenue decline
over CY18-20 while Indian players have witnessed strong growth suggesting market
share shift to India.
The winning framework: Our interaction with innovators suggest they evaluate
prospective partners on tech capability, quality and reliability of production process,
cost, size, potential to scale and safety. To this we add balance sheet strength and good
capital allocation. NFIL and SRF - with recognized expertise in fluorochemistry - tick
most of the boxes, in our view.
SRF's aggression paid rich dividends over FY18-21: SRF undertook Rs 16bn of capex
in its specialty chem business over FY16-18 - a period that saw its revenues from the
segment stagnate. It invested in anticipation of a turnaround in the global agro chem
cycle even though it didn't have any firm off-take agreements. The strategy paid off
handsomely as its specialty chem revenues jumped 4.2x over FY18-21 as the agro chem
cycle revived.
Exhibit 1 - SRF undertook Rs 16bn of capex in its specialty Exhibit 2 - SRF benefited from 4.2x rise in agro chem revenues
chem business over FY16-18 when revenues were stagnating over FY18-21 as the agro chem cycle revived
SRF Chemicals Segment Capex 30 SRF Specialty Chemical Revenues
10,000 (Rs mm) 9,357 (Rs bn)
8,415 23.9
9,000 25
8,000 4.2 x
7,000 20
6,118 6,187
6,000 5,033
4,987 15
5,000 4,057
4,000 3,148 3,418 10
2,852
3,000 5.7
2,000 5
1,000
0 0
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 18 FY 21
. .
Source: Jefferies, company data Source: Jefferies, company data
SRF's commodity businesses also hit peak margins and should mean revert now:
Packaging film margins expanded from high teens to 31% by FY21 and was the largest
3 November 2021 4
EQUITY RESEARCH
India | Chemicals
contributor to Ebitda growth over FY18-21. With large capacity additions globally, we
expect the margins to mean revert over FY21-24E taking away one major growth lever.
Exhibit 3 - Packaging Films was the largest driver of Ebitda Exhibit 4 - We expect PF to not be a growth lever in medium
growth over FY18-21 term as large capacities are added globally
25 SRF EBITDA Waterfall Between FY18 and FY 21 SRF Packaging Segment EBITDA Margin (%)
(Rs bn) 0.4 21.3 35%
7.2 31%
20 30%
25%
25% 23%
15 5.5
21%
18% 19% 19%
20% 18%
17%
9.1
10
15%
0.8
5 10%
5%
0
FY 18 Technical Chemicals Packaging Others FY 21 0%
Textiles Films FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
. .
Source: Jefferies, company data Source: Jefferies estimates, company data
NFIL less exposed to agro chem cycle: c60% of NFIL's specialty chem revenues come
from pharma customers while SRF derives 10-15% of its specialty chem revenues from
the segment. This makes NFIL's earnings more resilient, in our view.
Exhibit 5 - NFIL is less exposed to the agrochem cycle than SRF

given higher pharma exposure than agrochem
Estimated Revenue Mix (%)
100%
80%
60%
40%
20%
0%
NFIL SRF
Pharma Agrochem/Industrial
.
Source: Jefferies estimates, company data
NFIL's new-found aggression will accelerate its earnings trajectory: Unlike SRF, NFIL in
the past did not undertake capex in anticipation of demand. With the induction of the
current MD, the company has accelerated its capex plan over FY22-24E. This will anchor
accelerating earnings growth for NFIL.
3 November 2021 5
EQUITY RESEARCH
India | Chemicals
Exhibit 6 - NFIL has accelerated its capex plan Exhibit 7 - This will drive sharp acceleration in Ebitda growth
12,000 NFIL Capex (Rs mm) NFIL EBITDA CAGR (%)

11,000 30%
26.9%
10,000
25%
8,000
20%
6,000 15% 12.9%
4,000 3,010 10%

2,680
2,000 981 5%
0 0%
FY 13-15 FY 16-18 FY 19-21 FY 22-24E FY 18-21 CAGR FY 21-24E CAGR
. .
Source: Jefferies estimates, company data Source: Jefferies estimates, company data
Further upside optionality from new product wins: NFIL won a 7-year US$ 410mn
contract to manufacture a high performance product (HPP) for a new customer segment
in 4QFY21. This will add ~20% to NFIL’s revenues by FY24E. We see possibility of more
such new product breakthroughs that could boost its earnings growth trajectory.
Exhibit 8 - High Performance products is a new opportunity for Exhibit 9 - And a similar contribution to its Ebitda
NFIL and could contribute ~ 20% to revenues
25% High Performance Products as % of EBITDA
20% High Performance Products as % of Revenues 19%
21%
18% 20%
16% 16%
14%
14% 15%
12%
10% 10%
8%
6% 5%
4%
0%
2% 0%
0%
0% FY 22E FY 23E FY 24E
FY 22E FY 23E FY 24E .
. Source: Jefferies estimates, company data
Navin Fluorine - Initiate at Buy:

Accelerating earnings and upside optionality, initiate NFIL at Buy: NFIL with its technical
expertise in fluorine, accelerated capex program, augmented capabilities to handle
growth and strong balance sheet is well positioned to capture the growth opportunity
in pharma/agrochem CDMO, in our view. c60% exposure to pharma in high value
business makes it less exposed to the agrochem cycle. New product breakthroughs
(like HPP) have disproportionate positive impact on growth given its smaller revenue
base. Accelerating earnings growth (27% Cagr over FY21-24E) and optionality from new
product wins drive our Buy rating with PT Rs 3,840 - at 48x fwd PE. We note Divi's and
PI Ind's market caps have increased 13 and 14 times in the last decade as their profits
compounded at 17% and 27%, respectively, over the period.
SRF - Initiate at Unpf:

Await better entry point, Initiate SRF at Unpf: SRF's technical expertise in fluorine
chemistry, widening portfolio of specialty chemical molecules, aggressive capex with
room to improve utilization in existing facilities and a strong balance sheet position it
well for growth, in our view. However, c90% exposure to agro chem in specialty chem
makes it susceptible to a slowdown in the global agro chem cycle. Packaging films and
3 November 2021 6
EQUITY RESEARCH
India | Chemicals
technical textiles (60% of 1HFY22 Ebit) are at cyclical peak margins, and we expect a
reversal over FY22-24E. We forecast 20% PAT Cagr over FY21-24E compared to 37%
over FY18-21. Initiate at Unpf with PT Rs 1,890, as the current valuation ignores the
impending slowdown in earnings growth in our view.
3 November 2021 7
EQUITY RESEARCH
India | Chemicals
Story in Exhibits

Exhibit 10 - The global synthetic pesticides market is projected Exhibit 11 - The global small molecule CRO/CDMO market is
to grow at 5% CAGR forecast to grow at 10% CAGR
80 Global Synthetic Pesticides Market 70 Chemical Drugs Global CDMO Market

(US$ bn) 71 (U$ bn) 61
70 60 56
52
60 55 47
50
42
50 43 38
40 34
40 31
28
30 26
30
20
20
10 10
0 0
2014 2019 2024E 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
. .
Source: Jefferies, Anupam Rasayan Source: Jefferies, Asymchem
Exhibit 12 - The prevalence of fluorine in pharma has been rising Exhibit 13 - The share of fluorinated active ingredients for
agrochemicals approved over the last two decades is 53%
90 Fluorine containing drugs being introduced in the market

79
80 Breakdown of agrochemical compounds
70
58 57
60
50
47% Not Containing Fluorine
40 32
53% Containing Fluorine
30
20
17
20
11
10
0
0
1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-19
.
Source: Jefferies, MDPI, American Chemical Society .
Source: Jefferies, I-Science
Exhibit 14 - EU's share in global chemical exports has been Exhibit 15 - Along with China, India has also been a beneficiary
falling of EU's decline
EU Share of Global Chemical Exports 4% India Share of Global Chemical Exports
(%) (%)
24% 23.2% 3.2%
23% 2.9% 2.8%
3% 2.7%
21.6% 2.6% 2.5% 2.6%
22%
20.8% 2.3%
21% 2.1% 2.2%
19.6% 19.4% 19.6% 19.8% 1.9%
20% 2%
19.1% 19.2% 19.0%
19% 18.2%
18%
1%
17%
16%
15% 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
. .
Source: Jefferies, CEFIC Source: Jefferies, CEFIC
3 November 2021 8
EQUITY RESEARCH
India | Chemicals
Exhibit 16 - China made great progress over the 13th plan and Exhibit 17 - Chinese environmental norms tightening has
appears unlikely to loosen its climate goals target set for peak impacted key chemical hubs in China
CO2 emissions before 2030
.
Source: Joanna Lewis, Georgetown University
Exhibit 18 - Fluorochemical revenues of Chinese majors have Exhibit 19 - But the corresponding revenues of Indian
contracted in CY19 and CY20 fluorochemical majors (Eg: NFIL and SRF) have growth strongly
Revenues % y/y of key Chinese players Fluorine Related Revenues % y/y for (Navin Fluorine + SRF)
35% 32.3% 50% 44.6%

30%
22.0% 40%
25%
20% 28.9%
30%
15% 23.1%
18.7% 17.7%
10% 6.8% 20%
3.7%
5%
10% 4.1%
0%
-5% -0.3%
0%
-3.7%
-10%
-8.7% -2.2%
-15% -10%
CY 14 CY 15 CY 16 CY 17 CY 18 CY 19 CY 20 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
. .

3 November 2021 9
EQUITY RESEARCH
India | Chemicals
Navin Fluorine | Initiate with a Buy

Exhibit 20 - NFIL has grown its product catalog under MOL > 6x Exhibit 21 - Mgmt targets US$ 100 mm revenues from CRAMS
in the last decade segment by FY26-27E from current run-rate of ~ US$ 45 mm
60,000 Compounds in product catalogue of Manchester Organics 120 NFIL CRAMS Revenues
(US$ mm) 100
50,000 100
80
40,000 63
60 52
30,000 43
38
40 31
25 24
20,000 18
20 13
10,000 0
FY 16 FY 18 FY 20 FY 22E FY 24E FY 26-27E
0 Mgmt
2011 2015 Now Guidance
. .
Exhibit 22 - NFIL derives ~ 60% of its high value revenues from Exhibit 23 - NFIL has accelerated its capex plan
the pharma sector
12,000 NFIL Capex (Rs mm) 11,000

80% % of NFIL Revenues linked to pharma sector
68% 10,000
70% 63%
61% 62%
59%
60% 56% 8,000
49% 48%
50% 44%
40% 6,000
40%
4,000 3,010
30% 2,680
20% 2,000 981

10%
0
0% FY 13-15 FY 16-18 FY 19-21 FY 22-24E
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 .
Source: Jefferies, company data
Exhibit 24 - Employee costs have risen as NFIL augmented Exhibit 25 - High Performance products is a new opportunity for
skillsets in tech, R&D and business development NFIL and could contribute > 20% to EBITDA
14% Employee Costs as % of Revenues for Navin Fluorine 25% High Performance Products as % of EBITDA
21%
13.1% 20%
16%
13%
15%
12.3%
12.1%
10%
12% 11.9%
5%
0%
11% 0%
FY 16 FY 18 FY 20 1HFY22 FY 22E FY 23E FY 24E
. .
3 November 2021 10
EQUITY RESEARCH
India | Chemicals
Exhibit 26 - We expect EBITDA to grow at 27% CAGR over Exhibit 27 - NFIL P/E Valuation Trends
FY21-24E
80 x NFIL P/E Valuation 1 year forward (x)
NFIL EBITDA CAGR (%)
30% 70 x
26.9%
60 x
25% 50 x
Mean - 1 s.d.
40 x
20%
30 x
15% 12.9% 20 x
10 x
10% Mean + 1 s.d.
0x
May-16
Sep-16
May-17
Sep-17
May-18
Sep-18
May-19
Sep-19
May-20
Sep-20
May-21
Sep-21
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
5%
0% NFIL 1yr fwd P/E Mean

FY 18-21 CAGR FY 21-24E CAGR .
Exhibit 28 - Case Study: Divis Labs Exhibit 29 - Case Study: PI Industries
25 Divi's Labs PAT 8 PI Industries PAT 7.4

(Rs bn) (Rs bn)
19.8 7
20
13.8 5 4.6 4.6

15 13.5
4.1
11.1 4 3.7
10.6
3.2
10 8.5 8.8
7.7 3 2.5
6.0 1.9
5.3
4.3 2
5
1
0 0
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
. .
Exhibit 30 - NFIL's market cap small compared to the

opportunity size and earnings compounding ahead
1,600 Market Cap

(Rs bn) 1,351
1,400
1,200
1,000
800
13 x
600 465
400 14 x
163
200 103
34
0
NFIL Divis (Jan' Divis PI Ind PI Ind
(Current) 12) (Current) (Jan' 14) (Current)
.
3 November 2021 11
EQUITY RESEARCH
India | Chemicals
SRF | Initiate with Underperform

Exhibit 31 - SRF tech expertise solidified with c100 patents Exhibit 32 - Campaigns in dedicated plants have expanded as
SRF's product portfolio grew
120 Cumulative Patents Granted to SRF
25 Campaigns in dedicated plants
99
100 93
20
20
80 70
15 15
60 15
40 33 10
6
20 12 5
4 5
0
FY 15 FY 18 FY 19 FY 20 FY 21 Current 0
. FY 17 FY 18 FY 19 FY 20 FY 21
Source: Jefferies, company data .
Exhibit 33 - While SRF benefited from 4.2x rise in agro chem Exhibit 34 - ...aggressive capex during the agro chem slowdown
revenues over FY18-21 as the agro chem cycle revived... resulted in depressed return ratios
30 SRF Specialty Chemical Revenues SRF Chemicals Segment Return on Assets (Post Tax)
(Rs bn) 25% (%)
23.9
25
19.3%
4.2 x 20%
20
15%
15 11.9%
9.2% 9.9%
10% 8.8% 8.6%
10
6.7% 6.4%
5.7 5.6%
5 5%
0 0%
FY 18 FY 21 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
. .
Exhibit 35 - The last downturn in the agro chem cycle saw SRF's Exhibit 36 - During this period, Ebit margin in the segment also
specialty chem revenues decline 23% over FY16-18 declined sharply
45 SRF Specialty Chemical Revenues 42.5 SRF Chemicals Segment EBIT Margin
(Rs bn) (%)
40
35.7 30% Decline in Spec Chem
35 margins over FY16-18
29.9 24%
25% 22% 23%
30 21%
20%
23.9 19%
25 20% 17%
17%
Decline in Spec Chem 16%
20 16.2 15%
revenues over FY16-18
15
10.4 10%
10 7.4
6.1 5.7
5 5%
0 0%
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
. .
3 November 2021 12
EQUITY RESEARCH
India | Chemicals
Exhibit 37 - Capacity addition in BOPET is picking up which can Exhibit 38 - We thus build in mean reversion in PF margin with
put pressure on margins going forward almost 35% increase in global capacities over CY21-23E
BOPET Thin Film Capacity Globally SRF Packaging Segment EBITDA Margin (%)
8,000 35%
31%
7,323 7,342
7,500 30%
FY20-23E CAGR 11%
6,759 25%
7,000 23%
25%
21%
6,500 19% 19%
20% 18% 18%
FY18-20 CAGR 3% 5,851 17%
6,000
15%
5,500 5,308
5,003 5,082
10%
5,000
4,500 5%
4,000 0%
2018 2019 2020 2021E 2022E 2023E 2024E FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
. .
Source: Jefferies, Polyplex Source: Jefferies estimates, company data
Exhibit 39 - We also model a gradual compression in Technical Exhibit 40 - We build in margin compression from the peak
Textiles margins for SRF resulting in a slowdown in earnings growth
SRF Technical Textiles Segment EBITDA Margin (%) SRF PAT CAGR (%)
30% 40% 37.4%
26%
35%
25% 23% 30%
20%
25%
20% 17% 19.5%
16% 16% 20%
15% 15.1%
15% 14% 15%
12%
10%
10%
5%
0%
5%
-5%
0% -10%
-7.2%
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E FY 12-15 FY 15-18 FY 18-21 FY 21-24E
. .
Exhibit 41 - Strong OCF can fund most of the planned capex Exhibit 42 - Valuations rich in the context of expected earnings
slowdown
25 SRF Operating Cash Flow and Capex
(Rs bn) 30 x SRF EV/EBITDA Valuation 1 year forward (x)
20
25 x
15 20 x
Mean - 1 s.d.
15 x
10
10 x
5
5x Mean + 1 s.d.
0 0x
FY 22E
FY 23E
FY 24E
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Sep-21
May-16
May-17
May-18
May-19
May-20
May-21
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Operating Cash Flow Capex

.
SRF 1yr fwd P/E Mean
Source: Jefferies estimates, company data .
3 November 2021 13
EQUITY RESEARCH
India | Chemicals
Industry Overview
Large specialty chemical opportunity: The global specialty chemicals market was
valued at US$ 798bn in 2019 and is projected to grow at a 5% Cagr to US$ 1,034bn
by 2024 (Source: Tatva Chintan DRHP). Within specialty chemicals, we focus on the
pharmaceutical CRO/CDMO and synthetic agrochemical markets.
Innovator pharma companies, faced with increasing R&D expense on new drug
discoveries use CRO/CDMO players in low-cost geographies like China and India to
lower cost of R&D and manufacturing and reduce time to market. CDMO players offer
drug intermediate, API and final product development and manufacturing process
optimization. There is an increasing trend towards outsourcing of R&D spending by
global innovators. The global small molecule CRO/CDMO market is valued at US$ 38bn
currently and is projected to grow at 10% Cagr to US$ 82bn by 2030 (Source: Asymchem
DRHP).
The global synthetic crop protection chemical market is valued at US$ 55bn in 2019 and
is projected to grow at 5% Cagr to US$ 71bn by 2024 (Source: Anupam Rasayan DRHP).
Innovators have focussed on R&D and marketing while gradually moving away from
deploying capital in manufacturing and increased outsourcing to low-cost geographies
like China and India.
Exhibit 43 - The global specialty chemicals market is forecast to Exhibit 44 - The global synthetic pesticides market is also
grow at 5% CAGR over 2019-24 projected to grow at a similar 5% CAGR
6,000 Global Chemicals Market 80 Global Synthetic Pesticides Market
(US$ bn) (US$ bn) 71
1,034 70
5,000
60 55
4,000 798
50 43
677
3,000
40
4,544
2,000 30
3,530
3,096
1,000 20
10
0
2014 2019 2024E 0
Commodity Chemcials Specialty Chemicals 2014 2019 2024E
. .
Source: Jefferies, Tatva Chintan Source: Jefferies, Anupam Rasayan
Exhibit 45 - The global small molecule CRO/CDMO market is forecast to grow at 10%
CAGR over the next decade
70 Chemical Drugs Global CDMO Market

(U$ bn) 61
60 56
52
50 47
42
38
40 34
31
28
30 26
20
10
0
2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
.
Source: Asymchem, Jefferies
Fluorine prevalence increasing in pharma, agrochem: The salience of fluorinated

compounds in small molecule pharmaceuticals has been increasing owing to higher
3 November 2021 14
EQUITY RESEARCH
India | Chemicals
efficacy achieved by the induction of Fluorine. About 22% of small molecule drugs today
contain fluorine. The share of fluorine based drugs in the last five years stands at 37%.
Fluorinated compounds have improved biological efficacy of agrochemicals and have

found increasing use in crop protection in the last two decades. The share of fluorinated
active ingredients for agrochemicals approved over the last two decades is 53%. The
share further rises to 67% when we consider the most recent five-year period.
Exhibit 46 - The prevalence of fluorine in pharma has been rising Exhibit 47 - The share of fluorinated active ingredients for
79
70
58 57
60
50
40 32
30
20
17
20
11
10
0
0
1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-19

.
Exhibit 48 - 67% of agrochem compounds approved in last 5

years contain fluorine
Prevalence of Fluorine in New Agrochemical compounds
25
20
10
15 7
6 7
6 13
10 5
8 9 7 4 3
13 7
5 11 10 11 4 3
9 8 5 6 7
5 3 5 6 3 6 6
2 4 3 3 4
1 1 1 2 1 1 1 1
0 0 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Not containing Fluorine Containing Fluorine

.
In addition, research is ongoing in new applications of fluorine in new areas like Electric
vehicles, 5G handsets and in hydrogen fuel cells.
Exhibit 49 - New Applications of Fluorine

Area Application
Electric vehicles Toyota is working with scientists on a new fluoride ion battery which could offer much higher energy per unit weight
as conventional lithium
Fuel Cells Experimentation is ongoing to evaluate the effect of fluorine and sulfonic acid groups on the performance of H2/O2
based PEM fuel cells.
. 5G Coating of printed circuit boards with enhanced electrical characteristics
Manufacturing shift from high-cost locations like Europe: The shares of European Union
(EU) in global chemical capex and exports have steadily declined over the last decade
owing to increasing environmental restrictions and higher unit cost of production. Lower
cost geographies like China and India have been beneficiaries of EU's decline with
steadily improving share of global chemical exports.
3 November 2021 15
EQUITY RESEARCH
India | Chemicals
Exhibit 50 - EU's share in global chemical exports has been Exhibit 51 - EU's share in chemical capex has also declined
falling
EU share of global chemical capex (%)
EU Share of Global Chemical Exports
20% 18.2%
(%)
24% 23.2% 18%
23% 16%
14.0%
21.6% 14% 13.0%
22% 12.2% 12.5%
20.8% 11.5% 10.9%
12% 10.5% 10.2% 10.1% 10.6%
21%
19.6% 19.4% 19.6% 19.8% 10%
20% 19.1% 19.2% 19.0% 8%
19% 18.2%
6%
18%
4%
17%
2%
16%
0%
15% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 .
. Source: Jefferies, CEFIC
Source: Jefferies, CEFIC
Exhibit 52 - China has been the key beneficiary... Exhibit 53 - ... as well as India
14% China Share of Global Chemical Exports 13.4% 4% India Share of Global Chemical Exports
(%) (%)
13% 12.4% 12.5% 3.2%
11.9% 2.9%
12% 11.5% 3% 2.8%

2.6% 2.7%
2.5% 2.6%
11% 2.3%
10.2%
9.9%
10.2% 2.1% 2.2%
1.9%
10% 2%
9.2%
8.9%
9%
8.1%
8% 1%
7%
6% 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
. .
Source: Jefferies, CEFIC Source: Jefferies, CEFIC
Chinese environmental norms tightening impacts chemicals: China proposed

quantitative targets on reduction of energy intensity and carbon intensity for their 5-year
plan over 2016-20. While the carbon intensity target has been met, the energy intensity
reduction fell short of target. The NDRC categorized 19 provinces as "red" or "yellow"
depending on the extent of the miss. Three out of five major chemical hubs in China-
namely Jiangsu, Guangdong and Hubei have been categorized as "red". The authorities
are required to tighten supervision of "two high" projects i.e. high energy consumption
and high emission in these provinces. Chemicals fall under the definition of "two highs"
and have been facing operating rate cuts since August.
China appears unlikely to loosen its climate goals target set for peak CO2 emissions
before 2030 and further reduction in carbon intensity and energy intensity over
its 2021-25 Plan. The People's Daily noted that poor planning by local provincial
governments is responsible for the current power cuts as the guidelines around climate
goals and limiting energy consumption have been in place since 2015. Policy risks on
the chemical industry in China is a tailwind for India that has players with technical
capability, lower cost and good track record of quality and HSE.
3 November 2021 16
EQUITY RESEARCH
India | Chemicals
Exhibit 54 - China's climate goals include targets to reduce energy and carbon intensity
.
Exhibit 55 - China made great progress over the 13th plan and appears unlikely to loosen its climate goals target set for peak
CO2 emissions before 2030
.
3 November 2021 17
EQUITY RESEARCH
India | Chemicals
Exhibit 56 - Chinese environmental norms tightening has impacted major chemical

hubs
Province Energy Intensity Alert Energy Consumption Alert Comment
Qinghai Higher Than Target Higher Than Target
Ningxia Higher Than Target Higher Than Target
Guangxi Higher Than Target Higher Than Target
Guangdong Higher Than Target Higher Than Target Chemical Hub
Fujian Higher Than Target Higher Than Target
Xinjiang Higher Than Target Borderline Achievement
Yunnan Higher Than Target Higher Than Target
Shaanxi Higher Than Target Borderline Achievement
Jiangsu Higher Than Target Higher Than Target Chemical Hub
Zhejiang Borderline Achievement Borderline Achievement
Henan Borderline Achievement Within Target Chemical Hub
Gansu Borderline Achievement Within Target
Sichuan Borderline Achievement Borderline Achievement
Anhui Borderline Achievement Borderline Achievement
Guizhou Borderline Achievement Within Target
Shanxi Borderline Achievement Within Target
Heilongjiang Borderline Achievement Within Target
Liaoning Borderline Achievement Within Target
Jiangxi Borderline Achievement Within Target
Shanghai Within Target Within Target
Chongqing Within Target Within Target
Beijing Within Target Within Target
Tianjin Within Target Within Target
Hunan Within Target Within Target
Shandong Within Target Within Target Chemical Hub
Jilin Within Target Within Target
Hainan Within Target Within Target

Hubei Within Target Higher Than Target Chemical Hub
Hebei Within Target Within Target
. Inner Mongolia Within Target Within Target
Source: Jefferies, Platts
China labor cost increasing: Our interaction with agro chem innovators suggest a strong
preference for China earlier owing to large scale and lower cost of production compared
to India. However, policy changes in China including relocation of existing plants to
chemical parks and pollution related restrictions on operations have increased costs
and reduced reliability of supplies. In addition, Chinese labor costs have inflated faster
than India's increasing the cost of operations. Innovators have been taking a more
balanced approach towards outsourcing by adding one or two sources in addition to
China.
Exhibit 57 - Labor cost in China has been rising Exhibit 58 - Chinese labor costs have inflated faster than India's
increasing the cost of operations
600 China Monthly Labor Cost Index
6 Hourly cost of compensation
500 (US$/hour)
4.8
5 4.5
4.1
400
4
3.1
300 3 2.6
2.0
2 1.6 1.7 1.6 1.6 1.6 1.7 1.7
200 1.5
1.2 1.2
1.0
0.7 0.8 0.8
1 0.6
100
0
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2005 2010 2011 2012 2013 2014 2015 2016 2017 2018
. India China
Source: China National Bureau of Statistics, Jefferies .
Source: Jefferies, CRISIL
China fluorochemical revenue growth slowing: We compared the revenue growth of

Chinese fluorochemical majors with those from India. Fluorochemical revenues of
Chinese majors have contracted in CY19 and CY20 whereas the corresponding revenues
of Indian fluorochemical majors - NFIL and SRF - have grown at a healthy pace reflecting
increased outsourcing to India as innovators look beyond China.
3 November 2021 18
EQUITY RESEARCH
India | Chemicals
Exhibit 59 - Fluorochemical revenues of Chinese majors have contracted in CY19 and

CY20
Revenues % y/y of key Chinese players
35% 32.3%
30%
25% 22.0%
20%
15%
10% 6.8%
3.7%
5%
0%
-5% -0.3%
-3.7%
-10%
-8.7%
-15%
CY 14 CY 15 CY 16 CY 17 CY 18 CY 19 CY 20
.
Exhibit 60 - But the corresponding revenues of Indian fluorochemical majors (Eg: NFIL
and SRF) have growth strongly
Fluorine Related Revenues % y/y for (Navin Fluorine + SRF)
50% 44.6%
40%
28.9%
30%
23.1%
18.7% 17.7%
20%
10% 4.1%
0%
-2.2%
-10%
FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
.
3 November 2021 19
EQUITY RESEARCH
India | Chemicals
Navin Fluorine: Preferred pick

NFIL with its technical expertise in fluorine, accelerated capex program, augmented
capabilities to handle growth and strong balance sheet is well positioned to capture the
growth opportunity in pharma/agrochem CDMO, in our view. c60% exposure to pharma
in the high value business makes it less exposed to the agrochem cycle. New product
breakthroughs (like HPP) have disproportionate positive impact on growth given its
smaller revenue base. Accelerating earnings growth and optionality from new product
wins drive our Buy rating with PT of Rs 3,840- at 48x fwd PE. We note Divi's and PI Ind's
mkt caps have increased 13 and 14 times in the last decade as their profits compounded
at 17% and 27%, respectively, over the period.
Tech expertise in Fluorine: NFIL is among a handful of global players with expertise
in high pressure high temperature fluorination. Manchester Organics (MOL) gives
it pharma CRO/CDMO capabilities and relationships with innovators, and it has
commercialized a hexafluoro platform in pharma demonstrating its tech prowess.
Less prone to cycles: c60% of its high value revenues come from the pharma segment
making it less exposed to the global agro chem cycle and making its earnings growth
trajectory more resilient.
Accelerating capex: In the past, NFIL had a conservative approach towards capex and
did not undertake new facility development without firm contracts. The new MD has
accelerated its capex plan over FY22-24E that is the fulcrum to accelerate revenue
growth. Planned capex over FY22-24E is 2x that of the last six fiscals combined.
Augmenting capabilities to handle growth: Employee expenses are up 40% in 1HFY22

over 1HFY20 (pre-Covid) as NFIL augmented capabilities in 1) technology transfer,
design and engineering, 2) R&D and new application development and 3) marketing/
business development. More is in the pipeline as it plans to increase R&D headcount
from 120 to 200 over the medium term.
New product breakthroughs present attractive optionality: The HPP win should add
~20% to NFIL's FY24E Ebitda. We see the likelihood of similar new product win/s that
could materially bolster NFIL's earnings growth trajectory.
Net cash balance sheet: cRs 6bn net cash position gives NFIL the flexibility to quickly
add capacity if required to scale up the business.
Accelerating growth with upside optionality, initiate at Buy: We forecast 25% revenue
Cagr, and 23% Adj PAT Cagr over FY21-24E. We see the likelihood of new product wins
that could materially bolster NFIL's earnings trajectory and bake this into our target
multiple of 48x Dec-23 EPS to arrive at a price target of Rs 3,840. Initiate coverage with
Buy rating. We note Divi's revenues in FY11 and PI Ind's revenues in FY13 were similar
to NFIL current revenue base. Since then, markets caps of Divi's/PI Ind have increased
13/14x, as their profits compounded at 17% and 27%, respectively.
3 November 2021 20
EQUITY RESEARCH
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Technical expertise in fluorine

NFIL entered the fluorine chemistry business about five decades ago and has
established its reputation among the foremost fluorine chemistry specialists in India.
It started off manufacturing refrigerant gases but with mandated production cuts
emerging globally on the segment in the 1990s, it entered the specialty chemicals
business in early 2000s followed by an entry into the pharma CDMO space in 2011 with
the acquisition of UK-based Manchester Organics (MOL) with domain expertise in high
pressure high temperature fluorination.
The criticality of fluorine has increased rapidly with increased prevalence in drugs and
agrochemicals. The complexity of fluorine chemistry has also increased with up to six
fluorine atoms in a molecule. Only a handful of global players have technical expertise
in fluorochemicals. NFIL has already commercialized a hexafluoro (6 atoms) platform
in pharma and is exploring new applications in electric vehicles (EV) demonstrating its
technical prowess.
Exhibit 61 - The presence of fluorine in pharma has increased Exhibit 62 - The share of fluorinated active ingredients for
79
70
58 57
60
50
40 32
30
20
17
20
11
10
0
0
1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-19
.
Exhibit 63 - 67% of agrochem compounds approved in last 5 Exhibit 64 - NFIL has grown its product catalog under MOL > 6x
years contain fluorine in the last decade
Prevalence of Fluorine in New Agrochemical compounds 60,000 Compounds in product catalogue of Manchester Organics
25
50,000
20
10
40,000
15 7
6 7
6 13 30,000
10 5
8 9 7 4 3
13 7 20,000
5 11 10 11 4 3
9 8 5 6 7
5 3 5 6 3 6 6
2 4 3 3 4
1 1 1 2 1 1 1 1 10,000
0 0 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0
Not containing Fluorine Containing Fluorine 2011 2015 Now
. .
Source: Jefferies, I-Science Source: Jefferies, company data
3 November 2021 21
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Exhibit 65 - NFIL Overview
.
Long growth runway in CRAMS

The global pharma small molecule CDMO is a US$ 38bn opportunity currently projected
to grow at 10% Cagr to US$ 82bn by 2030. MOL's capabilities including a catalog of ~
50,000 compounds (building blocks) and services from early stage R&D to commercial
scale production positions NFIL well to benefit from the growth in CDMO space over
the next decade. 55-60% of NFIL's revenues in the segment come from repeat orders- a
validation of its technical prowess.
MOL played a key role in customer acquisition for NFIL through most of the last decade.
Given MOL's expertise in early stage (pre-clinical and Phase I trials) and given that a
new drug emerges from 5,000 to 10,000 molecule candidates, NFIL has one commercial
molecule in its portfolio currently. However, two more molecules are in the early stage
of monetization and are expected to ramp up over the next 12-24 months. The company
commissioned a new cGMP facility in late-FY20 that has created enough room for
ramping up production. Further de-bottlenecking capex is in the pipeline in FY23 to
augment capacity.
Exhibit 66 - Global small molecule CDO/CDMO market is set to rise at 10% CAGR over
the next decade
90 Small molecule CDO/CDMO Market (US$ bn)

82
78
80 73
69
70 65
61
60 56
52
47
50 42
38
40 34
31
26 28
30
20
10
0
2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
.
Source: Asymchem, Jefferies
3 November 2021 22
EQUITY RESEARCH
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Exhibit 67 - Mgmt targets US$ 100 mm revenues from CRAMS segment by FY26-27E from current run-rate of ~ US$ 45 mm
120 NFIL CRAMS Revenues
(US$ mm) 100
100
80
63
60 52
43
38
40 31
25 24
18
20 13
0
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E FY 26-27E
Mgmt
Guidance
.
Specialty chemicals benefiting from agrochem revival

NFIL's specialty chemical business caters to the pharma, agrochemicals and industrial
segments. Unlike the innovators that it services in the CRAMS segment, it supplies to
generic Indian pharma majors in the specialty chemicals segment.
NFIL's growth in the segment was impacted by a slowdown in the global agrochemical
industry over FY16-18. It continued to focus on adding new intermediate products to

its portfolio but did not undertake capex in anticipation of revival in demand. Revenues
accelerated sharply over FY18-21 as the global agrochemical cycle turned up. To its
credit, it was able to grow the generic pharma chemicals business at a fast tilt to
maintain the salience of the segment at 40% of revenues from specialty chemicals.
Exhibit 68 - The global synthetic pesticides market is projected Exhibit 69 - India Pharma API market is expected to rise at ~
to grow at ~ 5% CAGR over the next 5 years 11% CAGR over the next 5 years
80 Global Synthetic Pesticides Market 30 India Pharma API Market

(US$ bn) 71 (US$ bn) 26
70
25
11.4% CAGR
60 55
20
50 43
15
40 15
30
10
20
5
10
0 0
2014 2019 2024E 2019 2024E
. .
Source: Jefferies, Anupam Rasayan Source: Jefferies, Tatva Chintan
3 November 2021 23
EQUITY RESEARCH
India | Chemicals
Exhibit 70 - Breakdown of Specialty Chemicals Revenues

Breakdown of Specialty Chemical Revenues for Navin Fluorine
20%
40% Pharma
Agrochemical
Industrial
40%
.
Portfolio less prone to cycles

NFIL derives ~60% of its high value revenues from the pharmaceutical segment that is
a multi-year compounding opportunity not subject to cycles in our view. This contrasts
with the fluorination major SRF that derives c90% of its specialty chem revenues from
the agrochem segment. This makes NFIL's earnings trajectory more resilient in our view.
Exhibit 71 - NFIL derives ~ 60% of its high value revenues from the pharma sector
80% % of NFIL High Value Revenues linked to Pharma sector
68%
70% 63%
61% 62%
59%
60% 56%
49% 48%
50% 44%
40%
40%
30%
20%
10%
0%
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
.
Multi-fold ramp up in capex

In the past, NFIL's management had a conservative approach towards capex and did not
undertake new facility development in the absence of firm contracts. With the induction
of the current MD, the company has accelerated its capex plan over FY22-24E that is
the fulcrum to accelerate revenue growth.
The ongoing capex includes Rs 2bn MPP in specialty chemicals, Rs 4.5 bn HPP for a
new product in a new vertical and de-bottlenecking capex in the CRAMS business.
3 November 2021 24
EQUITY RESEARCH
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Exhibit 72 - NFIL has accelerated its capex plan
12,000 NFIL Capex (Rs mm)

11,000
10,000
8,000
6,000
4,000 3,010
2,680
2,000 981
0
FY 13-15 FY 16-18 FY 19-21 FY 22-24E
.
Augmenting capabilities to handle the growth ahead

The company management under the current MD brought the focus back on growth
and identified areas that NFIL needed to augment to scale seamlessly. These included
augmenting capabilities in 1) technology transfer, process design and engineering, 2)
R&D and new application development and 3) marketing/business development.
Since the business development pipeline included a number of technology transfer

opportunities, NFIL augmented its technology transfer, design and engineering team to
a strength of 80 in a short period of time. The team focuses on absorption and scale up of
currently existing production technologies and explores which production technologies
can be used across multiple chemistries.
NFIL has also augmented its R&D headcount to ~ 90 in the CRAMS business and 30
in the specialty chemical business. It is focusing its R&D efforts on new products for
new applications compared to the earlier focus of developing new products for existing
applications. It has started the process of setting up an application development lab to
further its R&D efforts. It intends to ramp up R&D headcount to 200 over the medium
term.
It has also augmented its business development team to target new segments within
pharma and new application categories besides pharma and agrochem.
Exhibit 73 - Tech and R&D capability augmentation

Name Designation Recruitment Date Prior Experience
Rahul Saxena President and Chief Scientific Officer Jan 2021 SRF, JDM Sientific Research Organization
Lalit Jain President, Projects Apr 2020 Aditya Birla Group
Mahendra Sarvankar Head, Technology and Design Apr 2020 Spectrum Pharma Consultants
Venu Gopal Devulapaelli General Manager, R&D Apr 2018 Prochem Organics
Vitthal G Gund Vice-President & Head, R&D July 2014 Herbert Brown Pharma and Research, Calyx Chemicals
Nabajyoti Deka Senior Manager, R&D May 2018 Jay Chemicals, Piramal Enterprises
Nishikant Ghadge Vice President, Process Chemistry July 2016 Ipca Labs
Swapnil Pathak General Manager, Technology & Design Oct 2020 Ingenero
Sanjay Bhavsar Group Leader - Process R&D, CRAMS Feb 2015 Chembiotik - TCG Life Sciences
Vinod A General Manager - Process Chemistry Aug 2021 PI Industries
. Manoj Agrawal Research & Development Manager Mar 2021 Lupin
Source: Jefferies, LinkedIn
3 November 2021 25
EQUITY RESEARCH
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Exhibit 74 - NFIL spends c4% of Revenues on R&D

7% R&D Spending as % of Revenues
6%
5%
4%
3%
2%
1%
0%
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
NFIL SRF PI Divis
.
Source: Jefferies, company data [Note: Includes relevant revenues only]
Exhibit 75 - Business Development capability augmentation

Name Designation Recruitment Date Prior Experience
Gopinath Rajan Business Head, High Performance Products Dec 2020 Reliance Industries (Procurement Team)
Amrit Singh Vice President & Head, Specialty Chemicals BU Aug 2020 SRF, UPL
Head - Talent, Corporate, Manufacturing Plants &
Sajesh Athayil Nov 2019 Aarti Industries
Greenfield Projects
. Shailee Khandelwal
Deputy GM, Strategic Partnerships Sep 2021 Aarti Industries

Source: Jefferies, LinkedIn
Exhibit 76 - Employee costs have risen as NFIL augmented skillsets in tech, R&D and
bizdev
14% Employee Costs as % of Revenues for Navin Fluorine
13.1%
13%
12.3%
12.1%
12% 11.9%
11%
FY 16 FY 18 FY 20 1HFY22
.
New product breakthrough opens door to similar opportunities

NFIL won a 7-year US$ 410mn contract to manufacture a high performance product
(HPP) based on fluorine chemistry in 4QFY21. It is a new product for a new customer
segment. The innovator will provide the technology and NFIL will manufacture both the
intermediate and the final product. The intermediate could be used in other applications.
NFIL will set up a new plant with Rs 4.5bn capex that is expected to commission in
1QFY23. The contract includes clauses to protect NFIL's interest if the client withdraws
from the contract before the end of the term. The company expects to add 3 to 4 new
products under its HPP business based on the breakthrough.
3 November 2021 26
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India | Chemicals
Exhibit 77 - High Performance products is a new opportunity for

NFIL and could contribute ~ 20% to revenues
20% High Performance Products as % of Revenues 19%
18%
16%
14%
14%
12%
10%
8%
6%
4%
2%
0%
0%
FY 22E FY 23E FY 24E
.
Exhibit 78 - New Applications of Fluorine

Area Application
Electric vehicles Toyota is working with scientists on a new fluoride ion battery which could offer much higher energy per unit weight
as conventional lithium
Fuel Cells Experimentation is ongoing to evaluate the effect of fluorine and sulfonic acid groups on the performance of H2/O2
based PEM fuel cells.
. 5G Coating of printed circuit boards with enhanced electrical characteristics
Disproportionate earnings impact as such opportunities fructify

Given NFIL's small revenue base, addition of a new product (HPP) has a disproportionate
impact on future growth in revenues and earnings. Any breakthrough in a new vertical
like EV or 5-G could deliver sharp upside to our current estimates. That said, these
opportunities could take two years to fructify.
Exhibit 79 - HPP could contribute ~ 22% to NFIL EBITDA by

FY24E
25% High Performance Products as % of EBITDA
21%
20%
16%
15%
10%
5%
0%
0%
FY 22E FY 23E FY 24E
.
Legacy business contribution will continue to shrink

NFIL's legacy business consists of refrigerant gases and inorganic fluorides. Both
businesses operate on short term contracts and are vulnerable to margin headwinds
when raw material costs inflate sharply.
It manufactures R-22 refrigerant gas that is used in stationary cooling applications like
room air conditioners and industrial refrigeration. Because of R-22's linkage to ozone
depletion, production or import of the refrigerant has been banned in the US and in EU.
India has committed to a timeline of 2030 to stop R-22 production in a phased manner.
The last production cut was enacted in CY2020. Company has been trying to increase
non-emissive uses of R-22 which are allowed under the current global mandate but
3 November 2021 27
EQUITY RESEARCH
India | Chemicals
this can offset only a part of the decline in R-22 use going forward. Company is also
evaluating investing in a new HFC facility that it intends to finalize by end-FY22.
The inorganic fluorides find use in steel and glass making where they lower the melting
temperature and in oil&gas sector as a catalyst. Pollution related restrictions in China
are likely to support prices of both the legacy businesses in the medium term. However,
margins may see some pressure as raw materials for both segments have also seen
sharp inflation from Chinese production cuts. In the absence of furthur capex, we
forecast the contribution of legacy businesses to NFIL's revenues to drop from 35% in
FY21 to 23% in FY24E.
Exhibit 80 - Non-compliant refrigerant gases are being phased out

Consumption Limit for HCFC Phase Out in India
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Base Line 2013 2015 2020 2025 2030 2040
.
Source: Jefferies, Ministry of Environment (Govt of India)
Exhibit 81 - As a result, contribution from legacy business is expected to shrink

Legacy Business Contribution to NFIL Revenues (%)
70% 65%
59% 59%
60% 55%
49% 49% 50%
48% 46%
50%
40% 35% 36%

28%
30% 24%
20%
10%
0%
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
.
Balance sheet strong

NFIL has generated strong operating cashflows over the past five years. Free cashflow
generation was also healthy, as the company ran a conservative capex program.
Company ended FY21 with a net cash balance of Rs 6.25bn that could fund the
acceleration in capex that is currently underway. Overall, the balance sheet provides
NFIL the flexibility to quickly add capacity if required to scale up the business.
3 November 2021 28
EQUITY RESEARCH
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Exhibit 82 - NFIL has generated strong operating cashflows over the past five years
6 NFIL Operating Cash Flow and Capex
(Rs bn)
5
0

.
Exhibit 83 - FCF generation was strong as company followed a conservative capex

program
NFIL Free Cash Flow
(Rs bn)
3
2.0
2 1.7
1.3 1.2
1.0 1.0
0.8 0.8
1 0.7
0.3
0.1
0
(1) (0.4)
(2) (1.4)
.
Exhibit 84 - The balance sheet provides NFIL the flexibility to quickly add capacity if
required to scale up the business
NFIL Net Cash
(Rs bn)
7 6.3
6
5
4.0
4 3.4
3.0
2.7
3 2.3 2.2
2
1.1
1 0.6
0.3 0.3 0.2 0.0
0
.
Valuation - accelerating earnings with potential upside optionality,

initiate at Buy
NFIL's technical capability in fluorine chemistry, large and growing opportunity canvas
and higher dependence on the pharma/CRAMS segment create a strong case for
compounded growth over the medium term, in our view. The balance sheet remains
adequately liquid to enable growth as opportunities fructify.
We forecast 25% revenue Cagr, 23% Adj PAT Cagr over FY21-24E as the HPP production
kicks in and the MPP and CRAMS debottlenecking capex are commissioned. We see
3 November 2021 29
EQUITY RESEARCH
India | Chemicals
the likelihood of new product wins that could materially bolster NFIL's earnings outlook
and bake this into our target multiple of 48x Dec-23 EPS to arrive at a price target of Rs
3,840. Initiate coverage with Buy rating.
We note Divi's revenues in FY11 and PI Ind's revenues in FY13 were similar to NFIL
current revenue base. Since then, mkt cap of Divi's/PI Ind have increased 13/14 times
respectively as their profits compounded at 17% and 22% respectively. NFIL has the
ingredients to follow in the same footsteps, in our view.
Exhibit 85 - Navin Fluorine market cap small as compared to opporunity size

1,600 Market Cap
(Rs bn) 1,351
1,400
1,200
1,000
800
13 x
600 465
400 14 x
163
200 103
34
0
NFIL (Current) Divis (Jan' 12) Divis (Current) PI Ind (Jan' 14) PI Ind
(Current)
.
Exhibit 86 - We forecast ~ 21% revenues CAGR for NFIL over FY20-24E

25 NFIL Revenues 23.4
(Rs bn)
18.9
20
13.9
15
11.8
10.0 10.6
9.1
10 7.2 7.5
6.8
5.5 5.9
4.9
5
0
Refrigerant Inorganic Fluoride Specialty Chemicals HPP CRAMS Others
.
Exhibit 87 - We expect EBITDA to grow at ~ 27% CAGR over

FY21-24E
NFIL EBITDA CAGR (%)
30%
26.9%
25%
20%
15% 12.9%
10%
5%
0%
FY 18-21 CAGR FY 21-24E CAGR
.
3 November 2021 30
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Exhibit 88 - ROCE trends for NFIL and SRF

20% Post Tax ROCE (%)
18%
16%
14%
12%
10%
8%
6%
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
NFIL SRF
.
Exhibit 89 - Navin Fluorine P/E Valuation Trends

80 x NFIL P/E Valuation 1 year forward (x)
70 x
60 x
50 x
Mean - 1 s.d.
40 x
30 x
20 x
10 x
Mean + 1 s.d.
0x
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Jul-16
Oct-16
Jul-17
Oct-17
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
NFIL 1yr fwd P/E Mean

.
Case Study: Divi's Laboratories

Exhibit 90 - Divis Labs EPS Growth Trends
25 Divi's Labs PAT
(Rs bn)
19.8
20
15 13.5 13.8
11.1 10.6
10 8.5 8.8
7.7
6.0
5.3
4.3
5
0
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
.
3 November 2021 31
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Exhibit 91 - Divis Labs P/E Valuation Trends

60 x Divis Labs P/E Valuation 1 year forward (x)
50 x
40 x Mean - 1 s.d.
30 x
20 x
10 x
Mean + 1 s.d.
0x
Sep-13
Sep-14
Sep-15
Sep-17
Sep-18
Sep-19
Sep-21
May-12
Sep-12
May-13
May-14
May-15
May-16
Sep-16
May-17
May-18
May-19
May-20
Sep-20
May-21
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Divis Labs 1yr fwd P/E Mean
.
Source: Jefferies, Bloomberg
Exhibit 92 - Divis Labs Market Cap Trends

1,600 Divis Labs Market Cap
(Rs bn)
1,400
1,200
1,000
800
600
400
200
0
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21
.
Case Study: PI Industries

Exhibit 93 - PI Industries EPS Growth Trends
8 PI Industries PAT 7.4
(Rs bn)
7
5 4.6 4.6
4.1
4 3.7
3.2
3 2.5
1.9
2
0
FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
.
3 November 2021 32
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Exhibit 94 - PI Industries P/E Valuation Trends

60 x PI Industries P/E Valuation 1 year forward (x)
50 x
Mean - 1 s.d.
40 x
30 x
20 x
10 x
Mean + 1 s.d.
0x
Sep-13
Sep-14
Sep-15
Sep-21
May-12
Sep-12
May-13
May-14
Sep-16
Sep-17
Sep-18
Sep-19
May-15
May-16
May-17
May-18
May-19
May-20
Sep-20
May-21
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
PI Industries 1yr fwd P/E Mean
.
Exhibit 95 - PI Industries Market Cap Trends

600 PI Industries Market Cap
(Rs bn)
500
400
300
200
100
0
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21
.
Exhibit 96 - Valuation Matrix
.
Source: Jefferies estimates, company data, Factset
Key risks to our price target

1) Loss of a customer in CRAMS as we saw in FY19.
2) A cyclical reversal in global agrochemical demand.
3) Loss of key management including current MD, senior leaders in R&D, business
development and tech transfer.
4) Sustained period of raw material inflation that hurts margins.
3 November 2021 33
EQUITY RESEARCH
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Exhibit 97 - Navin Fluorine Management Overview
.
Source: Jefferies, NFIL website
Exhibit 98 - Navin Fluorine Summary Income Statement

(Rs mm) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
Net Revenues from Operations 6,797 7,477 9,127 9,959 10,616 11,794 13,923 18,907 23,384
Raw Material Costs (3,111) (3,029) (4,023) (4,766) (4,838) (5,374) (6,469) (8,624) (10,517)
Gross Profit 3,686 4,448 5,104 5,194 5,777 6,420 7,454 10,284 12,867
Gross Margin (%) 54.2% 59.5% 55.9% 52.1% 54.4% 54.4% 53.5% 54.4% 55.0%
Employee benefits expense (806) (921) (1,105) (1,155) (1,308) (1,417) (1,671) (2,269) (2,806)
Other expenses (1,706) (1,949) (1,849) (1,855) (1,835) (1,910) (2,297) (3,025) (3,741)
EBITDA 1,173 1,578 2,150 2,184 2,635 3,093 3,486 4,990 6,320
EBITDA Margin (%) 17.3% 21.1% 23.6% 21.9% 24.8% 26.2% 25.0% 26.4% 27.0%
Depreciation and amortisation expense (225) (299) (398) (275) (370) (442) (482) (691) (1,103)
EBIT 949 1,279 1,752 1,908 2,265 2,651 3,004 4,298 5,216
EBIT margin (%) 14.0% 17.1% 19.2% 19.2% 21.3% 22.5% 21.6% 22.7% 22.3%
Finance costs (38) (18) (12) (8) (20) (18) (3) (3) (3)
Other Income 245 306 925 344 333 790 465 306 262
Exceptional items 0 273 0 0 0 155 0 0 0
Profit Before Tax 1,156 1,840 2,665 2,244 2,578 3,578 3,466 4,602 5,475
PBT Margin (%) 17.0% 24.6% 29.2% 22.5% 24.3% 30.3% 24.9% 24.3% 23.4%
Tax Expenses (321) (456) (840) (770) 1,436 (1,108) (867) (1,150) (1,369)
Current Tax (272) (458) (805) (729) (832) (1,194) (867) (1,150) (1,369)
Prior Period (2) 67 0 0 1,413 (1) 0 0 0
Deferred Tax (47) (65) (35) (40) 855 86 0 0 0
Profit After Tax Before JV 835 1,384 1,825 1,474 4,014 2,471 2,600 3,451 4,107
Share of profit from JV (0) 0 (27) 17 72 105 10 11 12

. Profit After Tax 835 1,384 1,798 1,491 4,086 2,575 2,610 3,462 4,118
3 November 2021 34
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Exhibit 99 - Navin Fluorine Summary Balance Sheet

Assets
Gross PP&E 4,614 6,292 3,321 3,595 4,651 5,125 6,125 13,625 14,625
Accumulated Depreciation (1,752) (2,007) (503) (746) (1,009) (1,366) (1,848) (2,540) (3,643)
Net PP&E 2,862 4,285 2,818 2,850 3,642 3,759 4,277 11,086 10,982
Right of use Assets 0 0 0 0 208 217 217 217 217
Capital Work in Progress 204 311 201 393 389 949 4,449 449 2,449
Investment Properties 0 0 573 562 550 539 539 539 539
Goodwill 878 878 878 878 878 878 878 878 878
Other Intangible Assets 7 3 7 13 10 8 8 8 8
Investment accounted for using equity method 0 0 315 333 405 8 8 8 8
Other non-current assets 2,131 1,410 2,113 2,437 2,427 670 670 670 670
Total non-current assets 6,082 6,886 6,905 7,465 8,508 7,028 11,046 13,854 15,751
Inventories 755 1,127 1,138 1,119 1,579 1,804 2,098 2,849 3,524
Investments 532 799 2,076 1,883 675 845 845 845 845
Trade Receivables 1,506 1,358 1,556 1,727 2,185 2,841 3,242 4,403 5,446
Cash and cash equivalents 287 481 374 370 2,779 5,439 3,204 1,905 2,221
Other current assets 387 423 506 508 559 1,019 1,019 1,019 1,019
Total current assets 3,467 4,189 5,651 5,607 7,777 11,947 10,409 11,021 13,054
Total assets 9,549 11,075 12,556 13,072 16,285 18,975 21,454 24,875 28,805
Liabilities and Equity
Equity Share Capital 98 98 99 99 99 99 99 99 99

Other Equity 6,356 7,547 9,736 10,626 14,023 16,240 18,458 21,401 24,902
Total Equity 6,453 7,645 9,835 10,724 14,122 16,339 18,557 21,500 25,001
Long Term Debt 475 511 42 0 0 0 0 0 0

Deferred tax liabilities (net) 370 434 308 348 0 207 207 207 207
Other non-current liabilities 287 281 257 231 391 409 409 409 409
Total non-current liabilities 1,132 1,226 607 579 391 616 616 616 616
Short Term Debt 341 192 84 41 14 25 25 25 25

Trade Payables 956 939 955 713 981 1,074 1,335 1,813 2,242
Other current liabilities 667 1,072 1,075 1,014 777 920 920 920 920
Total current liabilities 1,964 2,203 2,114 1,769 1,772 2,020 2,281 2,759 3,188
. Total Liabilities and Equity 9,549 11,075 12,556 13,072 16,285 18,975 21,454 24,875 28,805
3 November 2021 35
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Exhibit 100 - Navin Fluorine Summary Cash Flow

Cash Flow From Operating Activities

Cash generated from operations 1,027 2,606 2,191 1,620 2,029 2,199 3,061 3,567 5,044
Income taxes paid (net of refunds) (268) (323) (497) (719) (462) 173 (867) (1,150) (1,369)
Net Cash From Operating Activities 760 2,283 1,694 902 1,566 2,373 2,195 2,416 3,675
Cash Flow From Investing Activities

Capital Expenditure (680) (1,842) (487) (616) (1,077) (987) (4,500) (3,500) (3,000)
Payments for purchase of investments (1,735) (3,190) (5,292) (2,717) (3,202) (317) 0 0 0
Proceeds from sale of investment in Joint Venture 0 0 273 0 0 651 0 0 0
Proceeds from sale of investments 1,777 3,338 3,958 2,915 5,744 988 0 0 0
Others 112 32 186 174 (614) (2,706) 465 306 262
Net Cash From Investing Activities (527) (1,661) (1,363) (243) 851 (2,371) (4,035) (3,194) (2,738)
Cash Flow From Financing Activities

Net Borrowings 201 36 (69) (42) (41) 0 0 0 0
Dividend (including tax) (216) (343) (350) (611) (714) (394) (391) (519) (618)
Interest paid (38) (18) (12) (8) (20) (18) (3) (3) (3)
Others (120) (126) 41 (22) (34) (38) 0 0 0
Net Cash From Financing Activities (173) (452) (390) (683) (809) (451) (394) (522) (620)
. Net Change in Cash and Cash Equivalents 60 170 (59) (25) 1,609 (449) (2,234) (1,300) 316
3 November 2021 36
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Exhibit 101 - Navin Fluorine Summary Key Ratios

FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
Income Statement
Earnings Per Share (EPS) (Rs/share) 16.9 28.0 36.3 30.1 82.5 52.0 52.7 69.9 83.2
Dividend Per Share (DPS) (Rs/share) 4.1 3.7 6.0 10.4 12.0 8.0 7.9 10.5 12.5
ROE (%) 13% 20% 21% 15% 33% 17% 15% 17% 18%
ROCE (%) 11% 13% 16% 15% 15% 16.3% 17.5% 18.7% 18.7%
Dividend Payout (%) 25% 13% 16% 34% 15% 15% 15% 15% 15%
Balance Sheet
Book Value (Rs mm) 6,453 7,645 9,835 10,724 14,122 16,339 18,557 21,500 25,001
Book Value Per Share (Rs/share) 130.4 154.4 198.7 216.6 285.2 330.0 374.8 434.3 505.0
Net Debt (Rs mm) (2) (577) (2,324) (2,212) (3,440) (6,259) (4,024) (2,725) (3,041)
Net Debt/Equity (%) 0% -8% -24% -21% -24% -38% -22% -13% -12%
Net Debt/EBITDA (x) 0.0 x -0.4 x -1.1 x -1.0 x -1.3 x -2.0 x -1.2 x -0.5 x -0.5 x
Cash Flow
FCFF (Rs mm) 79 441 1,206 286 489 1,386 (2,305) (1,084) 675
FCFE (Rs mm) 41 423 1,194 277 469 1,367 (2,308) (1,086) 672
FCFF per share (Rs/share) 1.6 8.9 24.4 5.8 9.9 28.0 (46.6) (21.9) 13.6
FCFE per share (Rs/share) 0.8 8.5 24.1 5.6 9.5 27.6 (46.6) (21.9) 13.6
Valuation
EV/EBITDA (x) 138.4 x 102.6 x 74.5 x 73.4 x 60.3 x 50.5 x 45.4 x 32.0 x 25.2 x
P/B (x) 25.2 x 21.2 x 16.5 x 15.1 x 11.5 x 9.9 x 8.8 x 7.6 x 6.5 x
P/E (x) 194.5 x 117.4 x 90.4 x 108.9 x 39.8 x 63.1 x 62.2 x 46.9 x 39.4 x
Dividend Yield (%) 0.1% 0.1% 0.2% 0.3% 0.4% 0.2% 0.2% 0.3% 0.4%
FCF Yield (%) 0.0% 0.3% 0.7% 0.2% 0.3% 0.8% -1.4% -0.7% 0.4%
. Earnings Yield (%) 0.5% 0.9% 1.1% 0.9% 2.5% 1.6% 1.6% 2.1% 2.5%
3 November 2021 37
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SRF: Quality business at peak margins, earnings

growth to slow

SRF's technical expertise in fluorine chemistry, widening portfolio of specialty chemical
molecules, aggressive capex with room to improve utilization in existing facilities and a
strong balance sheet position it well for growth in our view. However, c90% exposure to
agro chem in specialty chemicals makes it susceptible to a slowdown in the global agro
chem cycle. Packaging films and technical textiles are at cyclical peak margins, and we
expect a reversal over FY22-24E. We forecast 20% PAT Cagr over FY21-24E compared
to 37% over FY18-21. Initiate at Unpf with PT Rs 1,890, as the current valuation ignores
the impending slowdown in earnings growth, in our view.
Expertise in Fluorine chemistry: SRF is the only player in India with in-house technology
to manufacture a wide range of fluorinated refrigerants including a next generation
product. It has a 400+ R&D team that has c100 patents on process optimization of novel
chemistries. Its portfolio of commercialized molecules has grown manifold over the last
five years.
Aggressive capex paid off in higher growth but dragged returns: Over the past decade,
SRF reinvested all the operating cashflows generated into augmenting manufacturing
facilities and R&D infra. It created capacities based on customer interest without firm
off-take agreements. Though this strategy led to periods of underutilization, SRF's
specialty chemical revenues grew 4.2x over FY18-21 as the agrochem cycle revived.
Susceptible to cycles; wider portfolio could cushion impact: SRF is susceptible to the
global agrochem cycle with the segment contributing c90% of its spec chem revenues.
The last agro chem downturn saw SRF's specialty chem revenues decline 23% and its
margins compress 4.8% over FY16-18. As SRF pursues its strategy of adding capacities
without firm offtake agreements, it remains exposed to an agro chem downturn. A wider
product portfolio now could cushion the impact relative to last time.
Refgas revenues could double over FY21-24E, but accelerating HFC phaseout medium
term risk: Revenue growth will be aided by significant unutilized capacity and ongoing
capex. Margin outlook is firm in the near-term. However, the US has finalized a new rule
that will cut HFC use and production 85% in 15 years with large cuts in 2022 and 2024.
We expect increased competition in exports in the medium term.
Packaging film (PF) and Tech textile (TT) margins should mean revert from cycle highs:
We see packaging film margins reverting towards cycle average starting FY22E on large
capacity additions and demand normalization as economies open up. This should be
followed by NTCF margins peaking out in FY22E and reverting gradually towards cycle
average over FY23-24E. Absolute Ebitda in both businesses will be aided by vol growth.
Earnings growth to slow, await better entry point, initiate at Unpf: We build in 22%
revenue Cagr in spec chem with 100bps margin expansion and margin compression in
PF and TT. We forecast 20% PAT Cagr over FY21-24E compared to 37% over FY18-21.
Initiate at Unpf with PT Rs 1,890 based on SOTP, as the current valuation ignores the
impending slowdown in earnings growth in our view. Given the quality of the business
and management, we wait for a better entry point.
3 November 2021 38
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Expertise in Fluorine chemistry

SRF entered the fluorochemical business in 1989 manufacturing refrigerants based on
technology licensed from outside. Over the years SRF developed in-house technology
to manufacture HCFC, major HFCs and next generation HFO that will find increasing
use in mobile air-conditioning over the next decade. It manufactures the widest range
of refrigerant gases and accounts for the largest market share in the country today
primarily relying on in-house production technology.
It focused its attention on the specialty fluorochem business a little over a decade
ago and set up its first manufacturing plant in 2011. It widened its capabilities across
Fluorine chemistry via R&D and established its reputation in supplying advanced
intermediates (one stage before active ingredients) primarily to agro chem and some
pharmaceutical customers. The business has grown > 3x in the past 5 fiscals (FY21 Rev
US$ 322 mn) and is the major growth driver for the company.
Exhibit 102 - Fluorine prevalence has been increasing in pharma Exhibit 103 - The share of fluorinated active ingredients for
79
70
58 57
60
50
40 32
30
20
17
20
11
10
0
0
1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-19
.
Exhibit 104 - 67% of new agrochemicals approved in last 5 years

contain fluorine
Prevalence of Fluorine in New Agrochemical compounds
25
20
10
15 7
6 7
6 13
10 5
8 9 7 4 3
13 7
5 11 10 11 4 3
9 8 5 6 7
5 3 5 6 3 6 6
2 4 3 3 4
1 1 1 2 1 1 1 1
0 0 0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Not containing Fluorine Containing Fluorine

.
3 November 2021 39
EQUITY RESEARCH
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Exhibit 105 - SRF Overview

.
Widened specialty chemical portfolio via R&D

Our interaction with innovators suggest they evaluate prospective CDMO partners on
technical capability, quality and reliability of production process, cost, size and safety
in that order. SRF management identified technical superiority as the cornerstone of
stronger customer relationships.
Over the years, it augmented its R&D headcount to 400+ and embarked on widening the
range of molecules it was working on across a wider array of chemistries. Total patent
filings jumped ~ 6x in the last 6 fiscals to 317 with 99 patents granted. Most patents are
in process optimization of novel chemistries. As a result, new products commercialized
in dedicated/multipurpose plants have increased substantially in the past four fiscals.
3 November 2021 40
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Exhibit 106 - SRF spends ~ 2% of revenues on R&D Exhibit 107 - SRF has filed for 317 patents till date
350 Cumulative Patents Filed by SRF

SRF R&D Spending as % of Specialty Chem, Refrigerant Gases and 309 317
Packaging Revenues
300
5% 4.5%
250
205
4%
200 170
3.0%
135
3% 2.6% 150
111
1.9% 100 81
2% 1.6% 54
1.2% 29 39
50 20
1%
0
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
Current
0%
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
. .
Exhibit 108 - SRF has been granted c100 patents Exhibit 109 - Campaigns in dedicated plants have expanded as
SRF's product portfolio grew
120 Cumulative Patents Granted to SRF
25 Campaigns in dedicated plants
99
100 93
20
20
80 70
15 15
60 15
40 33 10
6
20 12 5
4 5
0
FY 15 FY 18 FY 19 FY 20 FY 21 Current 0
. FY 17 FY 18 FY 19 FY 20 FY 21
Source: Jefferies, company data .
Undertook capex in anticipation of business that helped it capture

growth but depressed ROA
Over the past decade, SRF reinvested all the operating cashflows generated into
augmenting manufacturing facilities and R&D infrastructure. It created capacities based
on customer interest without any firm off-take agreements and did not slow down
its capex program even during the last agrochem slowdown in FY17-18. Though this
strategy led to periods of underutilization of its facilities dragging on return ratios,
it positioned the company to benefit the most when the cycle revived. Indeed, SRF's
specialty chemical revenues have grown 4.2x over FY18-21 as demand revived and
capacity utilization improved.
3 November 2021 41
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Exhibit 110 - Over the past decade, SRF reinvested all the Exhibit 111 - SRF did not slow down its capex program even
operating cashflows generated into augmenting manufacturing during the last agrochem slowdown in FY17-18
facilities and R&D infrastructure
25 SRF Operating Cash Flow and Capex
SRF Operating Cash Flow and Capex (Rs bn)
60 56.3
(Rs bn) 53.0 20
50
15
40
30.6 31.7 10
30
5
20
0
10
FY 22E
FY 23E
FY 24E
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
0
FY 12-16 FY 17-21 Operating Cash Flow Capex
.
. Source: Jefferies, company data
Exhibit 112 - Specialty chem revenues have risen 4.2x over Exhibit 113 - Asset turnover has improved from FY18 lows
FY18-21
1 SRF Chemicals Segment Asset Turnover
SRF Specialty Chemical Revenues (x) 0.6 x
30
(Rs bn) 1 0.5 x 0.6 x

23.9 0.5 x 0.5 x
25
1
4.2 x 0.4 x
20 0
15 0
0
10
5.7
0
5
0
0 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
FY 18 FY 21 .
Exhibit 114 - Periods of under-utilization have resulted in

depressed return ratios
SRF Chemicals Segment Return on Assets (Post Tax)
25% (%)
19.3%
20%
15%
11.9%
9.2% 9.9%
10% 8.8% 8.6%
6.7% 6.4%
5.6%
5%
0%
FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
.
Entering new product segment

SRF is entering a new segment in specialty chemicals by undertaking Rs 5bn capex in
a polytetrafluoroethylene (PTFE) plant with R-22 feedstock backward integration. The
plant will be based on SRF's in-house technology. PTFE is primarily used for electrical
insulation, anti-corrosive coating in pipes and as non-stick surface in cookware.
This is a new product for a new set of customers with the potential to reach 1.2x Asset
turns on the capex. The plant will commission in 3QFY23 and take 12-18 months to
3 November 2021 42
EQUITY RESEARCH
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achieve optimum utilization. SRF expects the product to be margin accretive to its
specialty chemical portfolio. Given SRF's large revenue base, we expect this new product
to contribute less than 15% of the specialty chemical revenues under steady state in
FY24E.
Exhibit 115 - SRF is entering a new segment (PTFE) which could

contribute < 15% of specialty chem revenues by FY24E
PTFE Contribution to SRF Specialty Chemical Revenues
(%)
16%
14%
14%
12%
10%
8%
6%
6%
4%
2%
0%
0%
Now FY23E FY24E
.
Agro chem is 90% of specialty chem revenues, susceptible to cycles

Some pharma molecules that failed to ramp up have resulted in the contribution of agro
chem nearing 90% of specialty chem revenues in FY21. SRF is adding R&D capabilities
in pharma and expects to turn the business around in 18-24 months. However, the
predominance of agro chem in its specialty portfolio exposes it to the global agro chem
cycle.
The last downturn in the agro chem cycle saw SRF's specialty chem revenues decline
23% over FY16-18. Ebit margin in the segment declined sharply on lower utilization amid
commissioning of new capex. As SRF continues with its strategy of adding capacities
without firm offtake agreements, it remains exposed to an agro chem downturn. A much
wider product portfolio now could cushion the impact relative to last time.
Exhibit 116 - The last downturn in the agro chem cycle saw Exhibit 117 - During this period, Ebit margin in the segment also
SRF's specialty chem revenues decline 23% over FY16-18 declined sharply
45 SRF Specialty Chemical Revenues 42.5 SRF Chemicals Segment EBIT Margin
(Rs bn) (%)
40
35.7 30% Decline in Spec Chem
35 margins over FY16-18
29.9 24%
25% 22% 23%
30 21%
20%
23.9 19%
25 20% 17%
17%
Decline in Spec Chem 16%
20 16.2 15%
revenues over FY16-18
15
10.4 10%
10 7.4
6.1 5.7
5 5%
0 0%
. .
Refrigerant gases: Strong growth with firm margins, HFC phase out in
US medium term risk
SRF doubled its HFC capacity to 32,000tn in FY20 but the capacity lies underutilized
(50-55% util) owing to Covid related restrictions that impacted passenger vehicle and
aircon sales in CY20-21. It is undertaking Rs 11bn capex to 1) double Chloromethane
capacity by FY23, 2) de-bottleneck R-32 capacity by end-FY22 and 3) build a backward
3 November 2021 43
EQUITY RESEARCH
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integrated capacity to swing between R-134a and R-32 by 2QFY24. The company
expects to double the revenues from the refgas segment over FY21-24 on the back of the
underutilized current capacities and the large capex currently underway. The imposition
of anti-dumping duties by US on Chinese refgas imports has improved realizations for
SRF's export volume supporting margins over 2HFY22E.
R-22 which is about a fourth of SRF's refgas capacity faces production and usage cuts
in India owing to links to global warming. A 25% reduction from baseline in 2020 will be
followed by 32.5% cut in 2026.
Given 40% of SRF's refgas revenues come from exports, we see a medium-term risk with
the accelerated pace of HFC production and consumption cuts in the US. The EU was the
first to phase down HFCs as early as 2016 owing to their link with ozone depletion and
global warming. The US, under the previous administration didn't move forward on HFC
production cuts. Immediately after assuming office, the new administration finalized a
new rule via the US EPA that will cut HFC use and production 85% in 15 years starting
2021. The EPA has already banned HFC R-134a in all new light vehicles manufactured
or sold in US from CY2021. It will further cut production and use of all HFCs from the
2020 baseline by 10% in 2022 followed by another 30% in 2024.
While HFC phase downs start only in 2032 in India keeping the domestic market intact
for SRF, we expect increasing competition in exports markets over the medium term.
SRF could mitigate some impact by exporting more to the Middle East/Africa/Latin
America and finding non-emissive uses of the products in its portfolio.
Exhibit 118 - Status of refrigerant gases
.
Source: Jefferies, Ministry of Environemnt, AGC, EU F-Gas Handbook
Exhibit 119 - HFC phase-down schedule in developed countries Exhibit 120 - HFC phase-down in EU
EU HFC Phase-Down Schedule
HFC Reduction Time Schedule for Developed Countries
Years Economy-Wide
100% 2015 100%
90% 2016-17 93%
80% 2018-20 63%
70% 2021-23 45%
60% 2024-26 31%
50% 2027-29 24%
40% . 2030 21%
30% Source: Jefferies, EU F-Gas Handbook
20%
10%
0%
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
.
Source: Jefferies, AGC
3 November 2021 44
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Exhibit 121 - Non-compliant refrigerant gases are being phased out in India too
Consumption Limit for HCFC Phase Out in India
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Base Line 2013 2015 2020 2025 2030 2040
.
Source: Jefferies, Ministry of Environment (Govt of India)
Exhibit 122 - Refrigerant revenues should double by FY24E Exhibit 123 - We are building some margin improvement in
chemicals in line with mgmt guidance
25 SRF Refrigerant Gas Revenues
(Rs bn) SRF Chemicals Segment EBIT Margin (%)
20.1 30%
20
17.0 24%
25% 23%
22%
20% 21%
15 12.9 19%
20% 17%
17%
9.9 16%
9.3 8.9
10 8.2 15%
5.9
4.5 10%
5
5%
0
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E 0%
. FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E
New gen refgas technology could cushion long-term impact

SRF has reverse-engineered the process to manufacture new age refgas R-1234yf that is
the likely candidate to replace R-134a in mobile air conditioning. The ban on production
and use of R-134a in new cars in US from 2021 is likely to accelerate the adoption of
R-1234yf. The patents on this new age gas expire over late CY2023 to mid-CY2025. We
think SRF could set up its own production facility to manufacture this new age refgas
around that timeframe.
Exhibit 124 - Inhouse HFO technology could cushion longer term impact for SRF
Environmental Impacts of MVAC Refrigerants
MVAC Refrigerant Global Warming Potential (GWP) Ozone Depleting?
HFC-134a 1,430 No
. HFO-1234yf 4 No
Source: Jefferies, US Environmental Protection Agency
Packaging films: Low-cost producer close to its customers, margins

at cycle high
RF has undertaken significant capex in ramping up capacities in packaging films and
today runs 200ktpa BOPET and 100ktpa BOPP catering to packaging of food, medical
equipment and personal care products and in insulation. The capacities are spread over
India, Thailand, Hungary and South Africa and company has established relationships
with consumer goods majors that helps it enjoy strong utilization across its facilities.
It enjoys higher and less volatile margins compared to larger peers in India as a result
of its focus on unit cost minimization and improving mix of value added products in the
portfolio.
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SRF's packaging margins reached cyclical highs (31%) in FY21 on the back of limited
capacity additions over CY18-20, sharp increase in packaging demand as a fallout of
Covid and fall in feedstock costs over 1HFY21. The benign cycle has reversed in our view
with almost a 35% increase in global capacities over CY21-23E, firming of feedstock
costs and normalization of demand on reopening of economies. We expect packaging
film margins to contract sharply in FY22 and revert to the cyclical mean of high-teens
over FY22-24E.
SRF's newly commissioned capacities in Thailand and Hungary should accrete to Ebitda
in FY22E while its new capacity at Indore should aid Ebitda in FY23E. Overall, we project
a 2% Cagr in packaging film Ebitda over FY21-24E despite the large capacity addition.
Exhibit 125 - SRF's packaging film margins consistently higher Exhibit 126 - But capacity addition in BOPET is picking up which
than competitors can put pressure on margins going forward
35% EBITDA Margin (%) BOPET Thin Film Capacity Globally
8,000
30%
7,323 7,342
7,500
25% FY20-23E CAGR 11%
7,000 6,759
20%
6,500
15% FY18-20 CAGR 3% 5,851
6,000
10% 5,500 5,308

5,003 5,082
5% 5,000
0% 4,500
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
4,000
SRF Packaging Segment Jindal Poly Polyplex 2018 2019 2020 2021E 2022E 2023E 2024E
. .
Source: Jefferies, company data Source: Jefferies, Polyplex
Exhibit 127 - SRF has undertaken significant capex in ramping Exhibit 128 - Capital employed in packaging films has risen 3x in
up capacities in packaging films and today runs 200ktpa BOPET last 5 years
and 100ktpa BOPP
SRF Packaging Films Capital Employed
SRF Packaging Films Capex 50 (Rs bn)
45.4
12,000 (Rs mm) 10,985 45
40 35.3
10,000
35
30 27.8
8,000 24.8
25
5,533 19.1
6,000 20
14.4 14.7 15.8
3,520 3,453 3,489 15 10.5
4,000
2,749 10 5.9
1,870
2,000 1,327 5
871
440 0
0 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 .
3 November 2021 46
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Exhibit 129 - Key Drivers for margins in the packaging segment Exhibit 130 - We build in mean reversion in PF margin with
almost 35% increase in global capacities over CY21-23E
1,600 (US$/ton)
SRF Packaging Segment EBITDA Margin
1,400 0 (%) 31%
1,200
0
1,000 25%
0 23%
800 21%
18% 18% 19% 19%
600 0 17%
400 0
200 9% 9%
0
6% 6%
0
0
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Oct-16
Oct-17
Jan-17
Jan-18
Oct-18
Jul-18
Jan-19
Oct-19
Jul-19
Jan-20
Oct-20
Jul-20
Jan-21
Oct-21
Jul-21
Jul-17
FY 22E
FY 23E
FY 24E
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
BOPP PX PTA MEG
.
Source: Jefferies, Bloomberg .
Technical textiles: In a sweet spot but margins should mean revert

The segment primarily comprises nylon tyre cord fabric (NTCF) for non-radial tyres and
belting fabric for conveyor belts. With rapid increase in radialization, NTCF demand has
plateaued and revenues were flat over FY16-19 before declining sharply in FY20 as cost
of Caprolactum - the key feedstock declined 25% y/y. Margins in the segment have
improved though on imposition of ADD on Chinese imports in FY18 and benefits from
fall in feedstock cost that gets passed on generally with some lag.
ADD on Chinese imports was withdrawn in Dec-20 as Chinese prices moved to premium
over domestic prices. With India being a net importer, SRF renegotiated 12-month
contract prices with OEMs at the higher import price. This will help it return the highest
even profits in the segment in FY22E - up 150% y/y. It is also debottlenecking 10%
capacity by early FY23. We expect the NTCF margins to mean revert gradually but stay
higher than recent past as Chinese capacities would face some utilization constraints.
Exhibit 131 - Technical textiles revenues were flat over FY16-19 Exhibit 132 - TT margins at unprecedented levels on high import
before declining in FY 20 on lower feedstock cost prices from China
SRF Technical Textiles Revenues SRF Technical Textiles EBIT Margin
(Rs bn) (%)
25 30%
25%
20 25%
20%
15
14% 14% 14%
15% 13%
11%
10 10% 10%
10% 7%
5% 6%
5 5%
0 0%
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
1HFY22
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
1HFY22
Ann
Ann
. .
Source: Jeffferies, company data Source: Jeffferies, company data
We expect non-specialty chemical margins to mean revert over

FY22-23E
We see packaging film margins reverting towards cycle average starting FY22E followed
by NTCF margins peaking out in FY22E and reverting gradually towards cycle average
over FY23-24E.
3 November 2021 47
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Exhibit 133 - We build in mean reversion in PF margins... Exhibit 134 - ...and a gradual compression in TT
SRF Packaging Segment EBITDA Margin (%) SRF Technical Textiles Segment EBITDA Margin (%)
35% 30%
31% 26%
30% 25% 23%
25%
25% 23% 20%
21% 20% 17%
19% 19% 16% 16%
20% 18% 18% 15%
17% 14%
15% 12%
15%
10%
10%
5% 5%
0% 0%
. .
Expect growth to remain healthy but margins to compress on mean

reversion in cyclical businesses
SRF's PAT registered a Cagr of 37% over FY18-21 as the specialty chem business
benefited from the agro chem cycle reversal and the packaging film business'
profitability expanded to cyclical highs on reasons mentioned earlier.
We forecast PAT Cagr of 20% over FY21-24E as we see margins narrowing on (1)
raw material cost inflation that is likely to impact profitability over 2HFY22E and (2) a
reversion in PF and TT margins. We have not built in a slowdown in the global agro chem
cycle over our forecast period.
3 November 2021 48
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Exhibit 135 - SRF Segmental Summary

Segment Revenues, EBITDA and EBIT
Segment Revenues
Technical textiles 19,050 20,102 18,388 20,742 13,576 12,401 21,000 21,147 23,315
Chemicals 16,398 17,214 16,114 24,454 29,750 36,449 46,391 56,470 66,558
Packaging firms 13,606 14,092 17,823 26,533 26,040 32,917 44,294 49,365 56,705
Others 0 0 4,573 5,254 2,783 2,320 3,016 3,167 3,325
Total Segment Revenues 49,054 51,409 56,898 76,984 72,148 84,087 114,701 130,149 149,903
Segment EBITDA
Chemicals 5,520 4,950 4,545 6,059 7,568 10,012 12,511 15,794 18,949
Packaging firms 2,443 2,501 2,984 4,945 6,419 10,215 10,131 10,123 10,734
Others 0 0 552 579 403 337 452 475 499
Total Segment EBITDA 10,327 10,511 11,014 14,972 16,251 22,687 28,555 31,151 34,844
Segment EBIT
Chemicals 3,936 3,273 2,694 3,843 5,115 7,281 9,611 12,400 15,060
Packaging firms 1,940 1,970 2,298 4,115 5,556 8,979 8,670 8,595 9,138
Others 0 0 444 467 318 256 372 394 418
Total Segment EBIT 7,687 7,786 7,964 11,407 12,504 18,285 23,728 25,733 28,865
Segment Margins
Segment EBITDA Margin

Technical textiles 12.4% 15.2% 15.9% 16.3% 13.7% 17.1% 26.0% 22.5% 20.0%
Chemicals 33.7% 28.8% 28.2% 24.8% 25.4% 27.5% 27.0% 28.0% 28.5%
Packaging firms 18.0% 17.8% 16.7% 18.6% 24.6% 31.0% 22.9% 20.5% 18.9%
Others 12.1% 11.0% 14.5% 14.5% 15.0% 15.0% 15.0%
Overall EBITDA Margin 21.1% 20.4% 19.4% 19.4% 22.5% 27.0% 24.9% 23.9% 23.2%
Segment EBIT Margin

Technical textiles 9.5% 12.6% 13.8% 14.4% 11.2% 14.3% 24.2% 20.5% 18.2%
Chemicals 24.0% 19.0% 16.7% 15.7% 17.2% 20.0% 20.7% 22.0% 22.6%
Packaging firms 14.3% 14.0% 12.9% 15.5% 21.3% 27.3% 19.6% 17.4% 16.1%
Others 9.7% 8.9% 11.4% 11.0% 12.3% 12.5% 12.6%
. Overall EBIT Margin 15.7% 15.1% 14.0% 14.8% 17.3% 21.7% 20.7% 19.8% 19.3%
Exhibit 136 - We have assumed steep improvement in Asset Exhibit 137 - We model ~ 15% FY21-24E EBITDA CAGR for SRF
turnover in the chemicals segment
SRF EBITDA CAGR (%)
35% 33.0%
0.9 x SRF Chemicals Segment Asset Turnover
(x) 0.8 x
0.8 x 30%
25%
0.7 x 0.6 x
20% 16.1%
0.6 x 0.5 x
15%
0.5 x 10.6%
10%
0.4 x
5%
0.3 x
0%
0.2 x
-5%
0.1 x
-10% -6.2%
0.0 x FY 12-15 FY 15-18 FY 18-21 FY 21-24E
FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22E FY 23E FY 24E .
3 November 2021 49
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Exhibit 138 - EPS growth should slow over FY21-24E Exhibit 139 - Strong OCF; capex flat lining implies slower
revenue growth ahead
SRF PAT CAGR (%)
40% 37.4% SRF Operating Cash Flow and Capex
25
35% (Rs bn)
30% 20
25%
19.5%
20% 15
15.1%
15%
10
10%
5%
5
0%
-5% 0
FY 22E
FY 23E
FY 24E
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
-10%
-7.2%
FY 12-15 FY 15-18 FY 18-21 FY 21-24E
.
Exhibit 140 - OCF could meet most of the capex outlined Exhibit 141 - We expect net debt to remain comfortable
SRF Free Cash Flow SRF Net Debt
7 (Rs bn) 5.6 5.7 (Rs bn)
6 5.0 45
5 38.1
3.7 40
4 34.3
3 35 30.5 29.2
29.2 27.7
2 0.9 30 25.8
1 0.3 22.3
25 20.7 21.3
0 19.7
(1) 20
(0.3) 13.7
(2) (0.8) (0.6) 15
(1.6) 9.5
(3)
10
(4) (2.9)
(5) 5
(6) (4.5) 0
(7)
FY 22E
FY 23E
FY 24E
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
(6.2)
FY 22E
FY 23E
FY 24E
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY 20
FY 21
. .
Valuation - await better entry point, Initiate at Unpf

SRF's technical expertise in fluorine chemistry, widening portfolio of spec chem
molecules, room to improve utilization in existing capacities and a strong balance sheet
position it well for growth in our view. High exposure to the global agro chem cycle and
reversal of margins in PF and TT from cyclical peaks make us cautious. We forecast
20% PAT Cagr over FY21-24E compared to 37% over FY18-21.
The stock has rallied 140% over 1-year and is trading at 1-yr fwd Ev/EBITDA multiple of
24x (compared to last 2-yr avg of 13.8x) - rich in our view given the earnings slowdown
that we expect. We value SRF on SOTP valuing the specialty chemicals business at
26x fwd EV/Ebitda, the packaging films business at 8x fwd EV/Ebitda and the technical
textiles business at 6x fwd EV/Ebitda. We initiate with Unpf rating and PT of Rs 1,890.
We await a better entry price.
3 November 2021 50
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Exhibit 142 - SRF SOTP Based Valuation Framework
.
Key risks to our price target

1) Spec chem margins continue to expand
2) PF margins remain at current level or expand further
3) NTCF margins sustain at current level

4) A major acquisition in pharma segment
Exhibit 143 - SRF P/E Valuation Trends

45 x SRF P/E Valuation 1 year forward (x)
40 x
35 x
30 x
Mean - 1 s.d.
25 x
20 x
15 x
10 x
Mean + 1 s.d.
5x
0x
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Jul-16
Oct-16
Jul-17
Oct-17
Jul-18
Oct-18
Jul-19
Oct-19
Jul-20
Oct-20
Jul-21
Oct-21
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

.
Exhibit 144 - SRF EV/EBITDA Valuation Trends

30 x SRF EV/EBITDA Valuation 1 year forward (x)
25 x
20 x
Mean - 1 s.d.
15 x
10 x
5x
Mean + 1 s.d.
0x
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Jul-16
Oct-16
Jul-17
Oct-17
Jul-18
Oct-18
Jul-19
Oct-19
Oct-20
Apr-21
Jul-20
Jul-21
Oct-21
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

.
3 November 2021 51
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Exhibit 145 - Valuation Matrix
.
Source: Jefferies estimates, company data, Factset
Exhibit 146 - SRF Management Overview

.
Source: Jefferies, SRF website
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Exhibit 147 - SRF Summary Income Statement

Gross Revenues 48,983 51,366 56,849 76,927 72,094 84,000 114,614 130,062 149,816
Excise Duty (3,056) (3,148) (958) 0 0 0 0 0 0
Net Revenues 45,927 48,218 55,890 76,927 72,094 84,000 114,614 130,062 149,816
Raw Material Costs (23,306) (24,184) (30,320) (43,596) (36,870) (40,189) (57,659) (66,295) (77,520)
Gross Profit 22,622 24,034 25,570 33,331 35,224 43,811 56,955 63,767 72,296
Gross Profit Margin (%) 49% 50% 46% 43% 49% 52% 50% 49% 48%
Staff Costs (3,863) (4,338) (4,740) (5,159) (5,419) (6,214) (8,023) (9,104) (10,487)
Other Operating Expenses (9,133) (10,002) (11,768) (14,619) (15,256) (16,264) (21,777) (24,712) (28,465)
EBITDA 9,625 9,694 9,062 13,552 14,549 21,333 27,155 29,951 33,344
EBITDA Margin (%) 21% 20% 16.2% 18% 20.2% 25.4% 23.7% 23.0% 22.3%
Chemicals 5,520 4,950 4,545 6,059 7,568 10,012 12,511 15,794 18,949
Packaging firms 2,443 2,501 2,984 4,945 6,419 10,215 10,131 10,123 10,734
Others 0 0 552 579 403 337 452 475 499
Unallocated (702) (818) (1,951) (1,420) (1,702) (1,353) (1,400) (1,200) (1,500)
Depreciation and Amortization (2,750) (2,834) (3,158) (3,669) (3,886) (4,531) (4,956) (5,547) (6,108)
EBIT 6,876 6,860 5,904 9,883 10,663 16,803 22,199 24,404 27,236
EBIT Margin (%) 15% 14% 11% 13% 15% 20% 19.4% 18.8% 18.2%
Finance Costs (1,305) (1,018) (1,239) (2,016) (2,007) (1,340) (1,158) (1,206) (1,206)
Other Income 278 730 1,151 401 491 664 916 1,017 1,327
PBT 5,849 6,572 5,817 8,269 9,147 16,127 21,957 24,215 27,356
PBT Margin (%) 13% 14% 10% 11% 13% 19% 19% 19% 18%
Taxes (1,551) (1,422) (1,200) (1,853) 12 (4,144) (5,533) (6,102) (6,894)

Current Tax (1,075) (1,165) (1,071) (1,482) (1,043) (3,580) (5,533) (6,102) (6,894)
Deferred Tax/Others (475) (257) (129) (370) 1,055 (564) 0 0 0
PAT from Continuing Operations 4,299 5,150 4,617 6,416 9,159 11,983 16,424 18,113 20,463
PAT from Discontinued Operations 0 0 0 0 1,032 (3) 0 0 0
PAT 4,299 5,150 4,617 6,416 10,191 11,979 16,424 18,113 20,463
. PAT Margin (%) 9% 11% 8% 8% 14% 14% 14% 14% 14%
3 November 2021 53
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Exhibit 148 - SRF Summary Balance Sheet

Assets
Non Current Assets

Gross PP&E 42,680 48,314 58,248 66,633 75,106 94,172 112,172 130,172 148,172
Accumulated Depreciation (2,547) (5,122) (8,200) (11,668) (14,876) (19,200) (24,156) (29,703) (35,811)
Net PP&E 40,134 43,193 50,048 54,965 60,229 74,972 88,016 100,469 112,361
Right of Use Assets 0 0 0 0 2,276 2,168 2,168 2,168 2,168
Capital work in progress 1,174 2,586 5,588 7,536 13,933 7,723 7,723 7,723 7,723
Goodwill 49 49 41 41 6 6 6 6 6
Other intangible assets 943 808 1,127 1,089 1,165 1,124 1,124 1,124 1,124
Other non-current assets 3,400 4,483 2,567 3,526 2,097 3,913 3,913 3,913 3,913
Total non current assets 45,700 51,118 59,371 67,156 79,706 89,905 102,949 115,402 127,294
Inventories 6,711 8,381 9,582 12,247 12,012 14,658 20,000 22,696 26,143
Investments 1,606 1,708 1,217 1,005 1,985 4,125 4,125 4,125 4,125
Trade receivables 5,145 6,569 6,807 10,288 8,911 12,746 17,391 19,735 22,732
Cash and cash equivalents 3,892 961 967 1,989 1,255 2,820 3,019 4,380 7,779
Other current assets 2,483 3,076 5,686 6,194 4,781 5,040 5,040 5,040 5,040
Total current assets 19,837 20,695 24,259 31,723 28,944 39,389 49,575 55,977 65,820
Assets classified as held for sale 0 0 0 0 118 0 0 0 0
Total Assets 65,536 71,813 83,630 98,879 108,768 129,294 152,524 171,379 193,114
Equity and Liabilities

Equity Share Capital 584 584 584 585 585 603 603 603 603
Other Equity 27,045 31,242 35,061 40,708 48,748 67,962 82,415 98,354 116,361
Total Equity 27,630 31,827 35,645 41,293 49,333 68,564 83,017 98,956 116,963
Borrowings 19,405 14,319 19,073 21,613 23,116 19,650 22,650 22,650 22,650
Lease Liabilities 0 0 0 0 740 638 638 638 638
Other non current liabilities 4,290 5,665 3,590 3,986 2,499 4,730 4,730 4,730 4,730
Total non current liabilities 23,695 19,983 22,663 25,600 26,355 25,019 28,019 28,019 28,019
Borrowings 1,893 5,456 8,508 11,274 9,554 9,657 9,657 9,657 9,657
Current maturities of long term debt 3,855 4,188 3,838 4,415 7,798 4,603 4,603 4,603 4,603
Lease liabilities 0 0 0 0 137 138 138 138 138
Trade payables 7,146 8,089 10,442 13,824 11,117 15,852 21,629 24,544 28,272
Other current liabilities 1,319 2,270 2,534 2,474 4,473 5,462 5,462 5,462 5,462
Total current liabilities 14,212 20,003 25,322 31,987 33,079 35,711 41,488 44,404 48,131
Total Liabilities 37,907 39,986 47,985 57,586 59,434 60,730 69,507 72,422 76,150
. Total Equity and Liabilities 65,536 71,813 83,630 98,879 108,768 129,294 152,524 171,379 193,114
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Exhibit 149 - SRF Summary Cash Flow

Cash From Operating Activities
Cash generated from operations 11,988 7,614 7,957 10,458 14,472 20,270 22,945 27,826 30,628
Income tax paid (1,087) (1,159) (1,176) (1,502) (1,427) (2,553) (5,533) (6,102) (6,894)
Net Cash From Operating Activities 10,901 6,454 6,780 8,956 13,044 17,717 17,412 21,724 23,734
Cash From Investing Activities

Capital Expenditure (5,876) (6,740) (13,002) (10,564) (13,892) (12,144) (18,000) (18,000) (18,000)
Others (791) 607 1,049 422 2,088 (2,853) 916 1,017 1,327
Net Cash From Investing Activities (6,667) (6,133) (11,953) (10,142) (11,803) (14,997) (17,084) (16,983) (16,673)
Cash From Financing Activities

Proceeds from issue of shares / Buyback of shares 0 0 0 1 0 7,500 0 0 0
Net Borrowings 191 (906) 7,079 5,534 1,207 (6,708) 3,000 0 0
Dividends on equity share capital paid (575) (689) (689) (694) (803) (1,408) (1,971) (2,174) (2,456)
Corporate dividend tax paid (117) (140) (140) (142) (165) 0 0 0 0
Payment towards lease liability 0 0 0 0 (189) (202) 0 0 0
Finance costs paid (1,324) (1,109) (1,299) (2,241) (2,040) (1,574) (1,158) (1,206) (1,206)
Others 0 0 0 0 0 (120) 0 0 0
Net Cash From Financing Activities (1,825) (2,844) 4,951 2,458 (1,990) (2,511) (129) (3,379) (3,661)
. Net Change in Cash and Cash Equivalents 2,408 (2,523) (221) 1,272 (749) 209 199 1,362 3,399
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Exhibit 150 - SRF Summary Key Ratios

Income Statement
Earnings Per Share (EPS) (Rs/share) 14.5 17.4 15.6 21.7 34.4 40.4 55.4 61.1 69.1
Dividend Per Share (DPS) (Rs/share) 1.9 2.3 2.3 2.3 2.72 4.77 6.65 7.34 8.29
ROE (%) 17% 17% 14% 17% 22% 20% 22% 20% 19%
ROCE (%) 12% 11% 9% 13% 13.3% 15.5% 16.2% 15.3% 15.0%
Dividend Payout (%) 13% 13% 15% 11% 8% 12% 12% 12% 12%
Balance Sheet
Book Value (Rs mm) 27,630 31,827 35,645 41,293 49,333 68,564 83,017 98,956 116,963
Book Value Per Share (Rs/share) 93.3 107.4 120.3 139.4 166.5 231.5 280.2 334.1 394.8
Net Debt (Rs mm) 19,654 21,293 29,234 34,308 38,105 27,741 30,542 29,180 25,781
Net Debt/Equity (%) 71% 67% 82% 83% 77% 40% 37% 29% 22%
Net Debt/EBITDA (x) 2.0 x 2.2 x 3.2 x 2.5 x 2.6 x 1.3 x 1.1 x 1.0 x 0.8 x
Cash Flow
FCFF (Rs mm) 5,025 (285) (6,222) (1,608) (847) 5,573 (588) 3,724 5,734
FCFE (Rs mm) 3,700 (1,394) (7,520) (3,849) (2,887) 4,000 (1,746) 2,518 4,528
FCFF per share (Rs/share) 17.0 (1.0) (21.0) (5.4) (2.9) 18.8 (2.0) 12.6 19.4
FCFE per share (Rs/share) 12.5 (4.7) (25.4) (13.0) (9.7) 13.5 (5.9) 8.5 15.3
Valuation
EV/EBITDA (x) 72.1 x 71.8 x 77.7 x 52.3 x 49.0 x 32.9 x 26.0 x 23.5 x 21.0 x
P/B (x) 24.4 x 21.2 x 18.9 x 16.3 x 13.7 x 9.8 x 8.1 x 6.8 x 5.8 x
P/E (x) 156.9 x 131.0 x 146.1 x 105.1 x 66.2 x 56.3 x 41.1 x 37.2 x 33.0 x
Dividend Yield (%) 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.3% 0.3% 0.4%
FCF Yield (%) 0.5% -0.2% -1.1% -0.6% -0.4% 0.6% -0.3% 0.4% 0.7%
. Earnings Yield (%) 0.6% 0.8% 0.7% 1.0% 1.5% 1.8% 2.4% 2.7% 3.0%
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NAVIN FLUORINE INTERNATIONAL LTD (NFIL IN) The Long View
| Scenarios
RATING PRICE MARKET CAP Base Case
BUY INR3,361.50^ INR166.4B / INR166.4B Revenue Cagr of 33% in High Value business over
FY21-24E
Company level Ebitda margin +40bps over FY21-24E
PRICE TARGET (PT) UPSIDE SCENARIO PT DOWNSIDE SCENARIO PT
27% Ebitda Cagr and 23% Adj PAT Cagr over FY21-24E
INR3,840 INR4,170.00 INR2,770.00
PT Rs 3,840 at 48x P/E
^Prior trading day's closing price unless otherwise noted. Upside Scenario
Revenue Cagr of 35% in High Value business over
Estimates FY21-24E
INR 2021E 2022E 2023E 2024E Company level Ebitda margin +80bps over FY21-24E
EPS 52.02 52.71 69.93 83.18 30% Ebitda Cagr and 26% Adj PAT Cagr over FY21-24E
Previous PT Rs 4170 at 50x P/E
EBITDA (B) 3,093.0 3,486.0 4,990.0 6,320.0
Downside Scenario
Previous
Revenue Cagr of 28% in High Value business over
Rev. (MM) 11,794.0 13,923.0 18,907.0 23,384.0
FY21-24E
Previous
Company level Ebitda margin -120bps over FY21-24E
BV/Share 330.03 374.84 434.28 504.98

19% Ebitda Cagr and 17% Adj PAT Cagr over FY21-24E
Previous
PT Rs 2770 at 40x P/E
Net Profit 2,575.0 2,610.0 3,462.0 4,118.0
Previous
| Investment Thesis / Where We Differ
DPS 8.00 7.91 10.49 12.48
Synonymous with Fluorochemistry, accelerated capex
Previous
program, augmented capability to handle growth and
ROCE 16.3% 17.5% 18.7% 18.7% strong balance sheet
Previous 60% high value revenues from pharma lowers
susceptibility to agro chem cycles
Valuation New product HPP will substantially add to growth given

NFIL's small base
2021E 2022E 2023E 2024E
Earnings could compound at high-teens over next
FY P/E 64.6x 63.8x 48.1x 40.4x
decade
EV/EBITDA 0.1x 0.0x 0.0x 0.0x
EV/Rev 13.6x 11.5x 8.5x 6.8x | Catalysts

P/Rev 14.1x 12.0x 8.8x 7.1x New product wins
P/B 10.2x 9.0x 7.7x 6.7x New capex plans
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SRF LTD (SRF IN) The Long View
| Scenarios
RATING PRICE MARKET CAP Base Case
UNDERPERFORM INR2,123.30^ INR629.0B / INR629.0B Spec chem Revenue Cagr 22% over FY21-24E
Spec chem Ebitda margin +100bps FY21-24E
PRICE TARGET (PT) UPSIDE SCENARIO PT DOWNSIDE SCENARIO PT PF Ebitda margin 19% in FY24E from 31% in FY21
TT Ebitda margin 20% in FY24E from 17% in FY21
INR1,890 INR2,300.00 INR1,370.00
16% Ebitda Cagr, 20% PAT Cagr over FY21-24E
^Prior trading day's closing price unless otherwise noted. PT Rs 1,890 on an EV/EBITDA based SOTP
Upside Scenario
Estimates
Spec chem Revenue Cagr 24% over FY21-24E
INR 2021A 2022E 2023E 2024E
Spec chem Ebitda margin +200bps FY21-24E
EPS 40.44 55.44 61.14 69.08
PF Ebitda margin 19% in FY24E from 31% in FY21
Previous
EBITDA (B) 21,333.0 27,155.0 29,951.0 33,344.0 TT Ebitda margin 25% in FY24E from 17% in FY21
Previous 20% Ebitda Cagr, 23% PAT Cagr over FY21-24E
Rev. (MM) 84,000.0 114,614 130,062 149,816 PT Rs 2,300 on an EV/EBITDA based SOTP
Previous
Downside Scenario
BV/Share 231.46 280.25 334.06 394.85

Spec chem Revenue Cagr 18% over FY21-24E
Previous
Spec chem Ebitda margin -200bps FY21-24E
Net Profit 11,979.0 16,424.0 18,113.0 20,463.0
PF Ebitda margin 17% in FY24E from 31% in FY21
Previous
DPS 4.77 6.65 7.34 8.29 TT Ebitda margin 20% in FY24E from 17% in FY21
Previous 10% Ebitda Cagr, 12% PAT Cagr over FY21-24E
ROCE 15.5% 16.2% 15.3% 15.0% PT Rs 1,370 on an EV/EBITDA based SOTP

Previous
| Investment Thesis / Where We Differ
Valuation Fluorochemistry expertise, wide product portfolio,
significant spare cap and strong balance sheet key
2021A 2022E 2023E 2024E
strengths
FY P/E 52.5x 38.3x 34.7x 30.7x
90% spec chem revenues from agro chem makes it
EV/EBITDA 0.0x 0.0x 0.0x 0.0x susceptible to cycles
EV/Rev 7.8x 5.7x 5.0x 4.4x Refgas revenue and margin outlook strong in near term,
HFC phase out in US medium term risk
P/Rev 7.5x 5.5x 4.8x 4.2x
PF and TT margins at cycle highs shd reverse over
P/B 9.2x 7.6x 6.4x 5.4x
FY22-24E
Our SOTP based PT offers 10% downside
| Catalysts
Global agro chem slowdown
Weakening of spec chem margins
Weakening of PF and TT margins
Failure in adhering to environmental standards
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Company Description
NFIL
Navin Fluorine International Ltd. manufactures and sells fluorochemicals. It produces hydrofluoric acid and other fluorine
chemicals; and synthetic cryolite and fluorocarbon gases. It operates through the the following segments: Refrigerants, Specialty
Fluor chemicals, Inorganic Fluorides, and Contract Research and Manufacturing Services. The Refrigerants segment focuses in
carting stationary and mobile refrigeration, and air-conditioning business. The Specialty Fluor chemicals segment involves in
the pharmaceutical, agrochemical, and polymer industries. The Inorganic Fluorides segment comprises hydrofluoric acid and
various other inorganic fluorides used in pharmaceuticals, agrochemicals, steel, and glass industries. The Contract Research and
Manufacturing Services segment provide services to pharmaceutical companies. The company was founded by Arvind N. Mafatlal
in 1967 and is headquartered in Mumbai, India.
SRF
SRF Ltd. engages in the manufacture of chemical based industrial intermediates. It operates through the following segments:
Technical Textiles Business, Chemicals Business, Packaging Film Business, Others. The Technical Textiles business segment
includes nylon tyre cord fabric, belting fabric, coated fabric, laminated fabric, polyester tyre cord fabric, and industrial yarns, and
its research and development. The Chemicals Business segment comprises of refrigerant gases, chloromethane, pharmaceuticals,
certified emissions reductions and allied products, engineering plastics business. The Packaging Film Business segment consists
of polyester films. The Others segment relates to coated fabric, laminated fabric, and engineering plastics. The company was
founded by Arun Bharat Ram in January 9, 1970 and is headquartered in Gurgaon, India.
Company Valuation/Risks
NFIL
We value NFIL at 48x P/E for a PT of Rs 3,840. Key Risks: (1) Loss of a customer in CRAMS as we saw in FY19 (2) A cyclical reversal
in global agrochemical demand (3) Loss of key management including current MD, senior leaders in R&D, business development
and tech transfer (4) Sustained period of raw material inflation that hurts margins
SRF
We value SRF on a EV/EBITDA based SOTP to arrive at a PT of Rs 1,890. Risks: 1) Spec chem margins continue to expand; 2) PF
margins remain at current level or expand further; 3) NTCF margins sustain at current level; 4) a major acquisition in pharma segment
Analyst Certification:
I, Bhaskar Chakraborty, certify that all of the views expressed in this research report accurately reflect my personal views about the
subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in this research report.
I, Pratik Chaudhuri, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the
subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in this research report.
Registration of non-US analysts: Bhaskar Chakraborty is employed by Jefferies India Private Limited, a non-US affiliate of Jefferies
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LLC, a FINRA member firm, and therefore may not be subject to the FINRA Rule 2241 and restrictions on communications with a
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Investment Recommendation Record

(Article 3(1)e and Article 7 of MAR)
Recommendation Completion November 2, 2021 , 07:13 ET.
Recommendation Distributed November 2, 2021 , 19:30 ET.
Explanation of Jefferies Ratings

Buy - Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month
period.
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a 12-month period.
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within a 12-month period.
The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below
$10 is 20% or more within a 12-month period as these companies are typically more volatile than the overall stock market. For Hold
rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is
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expected total return over the next 12 months. The price targets are based on several methodologies, which may include, but are
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free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF, P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/
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Risks which may impede the achievement of our Price Target

This report was prepared for general circulation and does not provide investment recommendations specific to individual investors.
As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own
investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors
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3 November 2021 60
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value of, or income derived from the financial instrument described in this report. In addition, investors in securities such as ADRs,
whose values are affected by the currency of the underlying security, effectively assume currency risk.
Rating and Price Target History for: Navin Fluorine International Ltd (NFIL IN) as of 11-01-2021
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21
Rating and Price Target History for: SRF Ltd (SRF IN) as of 11-01-2021
3,000
2,500
2,000
1,500
1,000
500
0
Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21
Notes: Each box in the Rating and Price Target History chart above represents actions over the past three years in which an analyst
initiated on a company, made a change to a rating or price target of a company or discontinued coverage of a company.
Legend:
I: Initiating Coverage
D: Dropped Coverage
B: Buy
H: Hold
UP: Underperform
Distribution of Ratings
Distribution of Ratings
IB Serv./Past12 Mos. JIL Mkt Serv./Past12 Mos.
Count Percent Count Percent Count Percent
BUY 1895 63.48% 159 8.39% 22 1.16%
HOLD 954 31.96% 28 2.94% 6 0.63%
UNDERPERFORM 136 4.56% 1 0.74% 0 0.00%
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EQUITY RESEARCH

products and slowdown in Chinese fluorochem revenues due to tightening climate 10 0

positioned to capture the growth opportunity in pharma/agrochem CDMO, in our 30%

Balance sheet strong............................................................................................. 28

Exhibit 5 - NFIL is less exposed to the agrochem cycle than SRF

12,000 NFIL Capex (Rs mm) NFIL EBITDA CAGR (%)

6,000 15% 12.9%

4,000 3,010 10%

Navin Fluorine - Initiate at Buy:

SRF - Initiate at Unpf:

80 Global Synthetic Pesticides Market 70 Chemical Drugs Global CDMO Market

90 Fluorine containing drugs being introduced in the market

35% 32.3% 50% 44.6%

Navin Fluorine | Initiate with a Buy

12,000 NFIL Capex (Rs mm) 11,000

20% 2,000 981

0% NFIL 1yr fwd P/E Mean

Exhibit 28 - Case Study: Divis Labs Exhibit 29 - Case Study: PI Industries

25 Divi's Labs PAT 8 PI Industries PAT 7.4

13.8 5 4.6 4.6

Exhibit 30 - NFIL's market cap small compared to the

1,600 Market Cap

SRF | Initiate with Underperform

Operating Cash Flow Capex

like China and India.

70 Chemical Drugs Global CDMO Market

Fluorine prevalence increasing in pharma, agrochem: The salience of fluorinated

Fluorinated compounds have improved biological efficacy of agrochemicals and have

1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-19

Exhibit 48 - 67% of agrochem compounds approved in last 5

Not containing Fluorine Containing Fluorine

Exhibit 49 - New Applications of Fluorine

Source: Jefferies, company data

12% 11.5% 3% 2.8%

Chinese environmental norms tightening impacts chemicals: China proposed

Exhibit 56 - Chinese environmental norms tightening has impacted major chemical

Hainan Within Target Within Target

China fluorochemical revenue growth slowing: We compared the revenue growth of

Exhibit 59 - Fluorochemical revenues of Chinese majors have contracted in CY19 and

Revenues % y/y of key Chinese players

Fluorine Related Revenues % y/y for (Navin Fluorine + SRF)

Navin Fluorine: Preferred pick

trajectory more resilient.

Augmenting capabilities to handle growth: Employee expenses are up 40% in 1HFY22

Technical expertise in fluorine

Exhibit 65 - NFIL Overview

Long growth runway in CRAMS

90 Small molecule CDO/CDMO Market (US$ bn)

Specialty chemicals benefiting from agrochem revival

industry over FY16-18. It continued to focus on adding new intermediate products to

80 Global Synthetic Pesticides Market 30 India Pharma API Market

Exhibit 70 - Breakdown of Specialty Chemicals Revenues

Portfolio less prone to cycles

Multi-fold ramp up in capex

Exhibit 72 - NFIL has accelerated its capex plan

12,000 NFIL Capex (Rs mm)

Augmenting capabilities to handle the growth ahead

Since the business development pipeline included a number of technology transfer

Exhibit 73 - Tech and R&D capability augmentation

Exhibit 74 - NFIL spends c4% of Revenues on R&D

Exhibit 75 - Business Development capability augmentation

Deputy GM, Strategic Partnerships Sep 2021 Aarti Industries

14% Employee Costs as % of Revenues for Navin Fluorine