SRF, Navin Fluorine stocks shoot 12% on price hike for refrigerant gases

Refrigerant gas price increase in the US buoyed shares of SRF and Navin Fluorine, two major speciality chemicals players, by over 12% on 9th January. The stock price jump marked the third straight day of gains for both companies.

At 09:46 AM, shares of Navin Fluorine were trading at Rs 3,887.90 level on NSE, close to a 52-week high of Rs 4,017.10. Meanwhile, the price of SRF scrip was Rs 2,636.95. The soaring price is on the back of reports that US gas distributors have increased the cost of refrigerant gases. IGas USA pinpointed disruptions to the supply of R32 and R125 refrigerants, with prices jumping as much as 200%. This hike will help both companies earn big, according to a report by CNBC Awaaz.

Hdfc Brokerage firm Equirus said that every $/kg increase in the price of R32 refrigerant translates to an addition of Rs 260 crore to SRF's 2.5. An equivalent increase could mean an extra Rs 77 crore to the EBITDA level for Navin Fluorine. Both companies were under pressure to earn more in a declining global demand and an unprecedented amount of Chinese inventory flooding the market. Nevertheless, this is a favourable sign — investors welcome it, increasing stock prices.

Refrigerant gases are primarily supplied by domestic players such as SRF and Navin Fluorine. The entire R32 production capacity of SRF is around 29,000-30,000 tonnes, while Navin Fluorine's capacity is about 4,500 tonnes, which the company will double next month. Another factor which may provide momentum to the SRF share price is the production capacity of almost 7,000 tonnes of R125 refrigerants.

With both the firms still raking in the benefits of the rising price of refrigerant gases, SRF share price and Navin Fluorine continue to be under the investors' scanner. Stock is long overdue for an earnings boost, and sales that provide an upside to their earnings are set to support higher prices.

The boost has also aided SRF stock and Navin Fluorine in continuing their recent rally, with the new year off to a good start for investors.