Brokerage firm Morgan Stanley has reiterated its 'Underweight' rating on both Navin Fluorine International Limited and SRF Limited, citing significant exposure to refrigerant price volatility. According to reports from CNBC TV18, the brokerage expects India's R-32 footprint to more than double this year, which could weigh on pricing. Morgan Stanley anticipates R-32 prices to decline around 25% from last year's peaks, though they are likely to remain above marginal cash costs.
Refrigerant gases account for nearly one-third of earnings for both companies, as reported by CNBC TV18. The brokerage estimates that a $1 per kg reduction in margins could impact EPS by 8% to 13%. Despite the cautious view, analyst sentiment remains skewed towards the positive, with Navin Fluorine showing 21 'Buy' ratings, 3 'Hold' recommendations, and 5 'Sell' ratings among 29 analysts covering the stock. SRF has 20 'Buy' ratings, 6 'Hold' recommendations, and 9 'Sell' ratings among 35 analysts tracking the stock.
Despite the brokerage concerns, Navin Fluorine International delivered impressive Q3 FY26 results with net profit of ₹185.40 crores, marking a significant year-on-year increase of 121.77%. According to latest reports, revenue grew to ₹892.37 crores, reflecting a robust year-on-year growth of 47.21%. The company's operating margin expanded to 34.47%, an increase of 1,010 basis points compared to the same quarter last year, indicating strong operational efficiency. The net profit margin improved to 20.78%, up from 13.79% a year ago, showcasing the company's ability to convert revenue into profit effectively.
Despite the warning, shares of both companies showed mixed performance on the trading day. According to CNBC TV18, shares of Navin Fluorine International Limited settled 1.95% higher at ₹6,653, while SRF Limited ended 2.38% lower at ₹2,625.10. The divergent performance suggests market participants may be taking different views on the impact of the refrigerant price pressure on these companies' earnings outlook.
