I have trimmed my position in GFL in last few weeks and the key reasons are as follows:
Until Q1 it was generally the commodity side of the business that got impacted but now I see that pressure has started building in the FP business as well. I still believe GFL is one of the best chemical businesses in India with very little domestic/Chinese competition but the general slowdown in Europe has started impacting it and the recovery could take a few quarters.
There is also a possibility that I could be wrong in trimming my position since some parts of the business like Caustic/Chloromethane etc. have started bouncing back and company’s EV plans (LiPF6, LFP) etc. are just around the corner. One can expect US to release CFC quotas in Q3 for ref gases and that business too can pick up and also with Pharma picking up FSC performance may also pick up.
This is just an FYI since I had initiated the post should not be construed as investment advice.
Although they haven’t yet officially launched their website but they have started promoting their ev products… recently they put up a stall at the battery show india exhibition…See this on linkedin:
Another subdued quarter with significant reduction in revenue, margins and profitability. Overall revenue down 35%, EBIDTA down 70% and PAT down 85% YoY.
Revenue for Fluorochemicals segment was hut most with decine of more than 50% YoY.
Bulk Chemicals: Caustic soda/MDC prices were impacted further during the quarter but expected to have bottomed out. Expecting better H2 as compared to H1
Fluorochemicals: Volume and prices are impacted significantly due to weak demand in US and domestic. China dumping resulting is significant lower price realisation. Ref Gas volumes are expected to improve going forward however may remain subdued compared to FY23 due to impact of phasing out in US and aggressive Chinese pricing.
Flouropolymers: China dumping, lower demand particularly in Europe and destocking resulted in significant impact on the Business. H2FY24 is expected to be better due to expected phasing out of destocking, pickup in the demand in US and positive impact of exit of legacy players.
Battery Chemicals: Expected to commission by 2024. Asset turnover expected to be 2x with capex of 600-800 cr. Margins expected be 30%
Outlook: H2FY24 expected to be better than H1FY23 with recovery in key segment of Fluoropolymers . FY25 is expected to be better than FY23. Margins expected to be 30%+ in FY25.
Market have not reacted very badly as it should had been due to sharp fall in all matrices. This may be due to FY2025 with revenue and profitability expected to be better than FY2023. Important to see sequencial recovery from Q3 onwards
I recently got an opportunity to interact with a middle management person from Gujarat Fluorochem. Below is a summary of the brief discussion. It was a casual conversation and not an interview. I am recalling the conversation in form of Q&As only for the sake of clarity.
Disclaimer: Invested. Please do your own due diligence before investing anywhere.This post should be treated only as informational and should not form the SOLE BASIS for investment.
In what capacity did you work with the company
I was General manager (technical sales) looking after South East Asia region and handling the polymer division of the company.
How has been your experience in the company
It was a good experience. Company has a “take it easy” culture. There is no sense of urgency within the company and very little pressures to meet sales targets. Management seems confident in their decisions and does not interferes with the day to day workings which helps maintaining a relaxed environment. Most people who join the company stay for a very long time. Firings are very less. Compensations are acceptable but not very high and the promotions are mostly like in government organizations.
What was your job
I was responsible for handling sales and collections from polymer division in south east asia. My job was to understand polymer market requirements, push the products to various buyers, provide technical sales support and expand sales avenues. During my short stay of 2 years with the company, I very rarely had to explore other new buyers. The company has a well established supply chain such for the polymer division. The products are easily absorbed by the market. So much so that my job was effectively reduced to rationing the products across buyers and look after after sales technical support.
why did you quit
personal reasons, have been living in Mumbai for 15 years and wanted to shift back. also wanted to move back to oil industry (chemical engineer with ~20 years experience (Chevron, UOP, BPCL etc) in oil industry in various roles). Life in Fluorochem was quite stagnant and decision making flexibility is less. Essentially, it is a family run business and they take most decisions together with a few people in senior management.
The company claims that most of its products (PTFE, PFA, PVDF etc) are specialty of grade and they have very little exposure to commodity products. How much of it is true
Within my limited experience, i can say that it is fairly accurate. The customers are mostly fixed and a big reason for this is the proprietary nature of polymers. Their competition is mostly with big players like 3M, Chemours etc. However, one often gets to hear that many of the same products are manufactured by China also but most of their capacity is absorbed within the country. These materials are very specialized in nature and any customer can not change vendors readily which creates a stickiness in the industry. Further, while china is super efficient in manufacturing, they provide very little after sales support which is a must for these specialized polymers.
