Earnings Call Transcript - XNSE:NAVINFLUOR 2026-10-30

Operator

Ladies and gentlemen, good day and welcome to the Naveen Florin International Ltd. Conference call hosted by Cygnus Partners. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Today on the call, we have with us Mr. Rishad Mafatlal, Chairman, Mr. Nitin Kulkarni, Managing Director, and Mr. Anish Ganatra, Chief Financial Officer. This call will contain forward-looking statements about the company, which are completely based on the beliefs, opinion, and expectation of today's call. Actual results may differ materially. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. A detailed safe harbor statement is given on the page number 2 of the investor presentation of the company, which is uploaded on Stock Exchange and on the company's website with it. With this, I now hand the conference over to Mr. Vishad Mahfadal for his opening remarks. Thank you and over to you, sir.

Vishad Mahfadal, Chairman

Join Florin's Q2 and H1 FY27 earnings conference call. Joining me today are Managing Director, Mr. Nitin Pulkarni, our Chief Financial Officer, Mr. Anish Ganatra, and Ms. Payal Davai from Sigmus Partners, our investor relations advisor. Before we proceed, I would like to take this opportunity to thank MUFG In Time team for supporting us in managing our investor relations activities during the last five years. We appreciate their contribution and assistance extended to us during this period. We have appointed Cygnus Partners as our investor relations consultants. We look forward to working with them as we continue to strengthen our engagement with the investor community. Coming to our performance, in the first half of FY27, our pact crossed 500 crores with an EPS of Rs. 100. This result reflects our continued focus on strengthening our business, building capabilities for the future, and advancing our strategic priorities through disciplined execution. As we navigate the evolving business environment, our priority remains to strengthen our business fundamentals and deliver sustainable growth across all verticals. At the same time, the safety, health, and well-being of our employees remain paramount, and we continue to uphold high standards of safety and operational excellence across our facilities. I am also pleased to share that the Board has declared an interim dividend of Rs.8 per equity share with a face value of Rs.2 per share. In our HPP business, we continue to strengthen long-term customer relationships and commercial partnerships. In this context, I would like to highlight an important development announced recently. The tenure of our existing HFO supply contract with Solstice Advanced Materials has been extended by four years until December 2032 and will have an additional revenue potential of approximately US$180 million. I thank the management at Solstice for their continued trust in our capabilities and look forward to deepening our relationships with them. We are also making steady progress in developing advanced materials as a potential growth platform over the longer term, focusing on specialized applications across areas such as data centers, electronics, semiconductors, and defense, leveraging our expertise in fluorination, chemistry, and R&D capabilities. We are confident this business will create additional growth opportunities for us. Let me now provide a brief update on our ongoing CAPEX programs. During the quarter, we commissioned the debottlenecking of our MPP capacity at the Hedge. Our HFC capacity expansion is progressing as planned and remains on track for commissioning shortly. The KEMOS project, which will enable us to participate in the emerging advanced cooling market, is also progressing towards commissioning in Q3 FY27. Our investment in advanced material adoption capacity is progressing as per schedule and is expected to commission by Q2 FY28. In our CDMO business, Phase 2 of the CGMP4 facility, involving a capex of approximately 125th rows, is progressing as planned and is expected to become operational by the end of Q4, F527. The TDAF project to develop an indigenous specialty material with DRDO is progressing well as per schedule. While we deliver sustainable results and continue to invest in growth projects, the leadership and I are actively looking at meaningful investment in cutting-edge technologies that drive value for all our customers and ourselves. This includes enhancing the integration of digital technologies across our businesses, leveraging AI to strengthen our research capabilities and optimize our processes. We are also investing in renewable energy across plants, which will meet more than 60% of our energy requirements through renewable resources. As we progress to the next phase of growth, we recognize the importance of continuously strengthening our organizational capabilities and investing in our people. We remain committed to developing our existing talent, enhancing critical skill sets, and building the capabilities required to support our evolving business needs and long-term growth ambitions. I would like to also thank our customers, employees, partners, and all stakeholders for their continued trust and support, and we look forward to building on this foundation in the years ahead. With that, I wish you and your family a very happy Diwali and a prosperous New Year in advance. I will now hand over to Nitin to take through our business and operating performance.

Nitin Pulkarni, Other

Thank you, Vishat Bhai, and good evening, everyone, and thank you for attending the call today. We have delivered a strong set of results in what is otherwise a very volatile geopolitical environment. In this regard, I would like to recognize the efforts of our leadership and their teams for their commitment, agility, and effectiveness in navigating these challenging times. All our business verticals witnessed a strong performance during the quarter, supported by healthy growth momentum. In our HPP business, we continue to deliver healthy revenue growth during the quarter, supported by higher volumes and improved realization. The pricing environment for HFC remains firm, with realization improved on a sequential basis. We are also witnessing encouraging customer interest in our upcoming capacities, providing good visibility for the business going forward. Our new AHF facility has witnessed an improvement in utilization, contributing to our growth momentum, and R32 CAPEX is progressing as planned and remains on track for commissioning shortly. An extension of contract from Solstice Advanced Materials provides potential visibility beyond FY28 and would like to extend my appreciation to the partners and teams involved. With our established customer relationships, growing portfolio of products, and expanding geographical footprint, we are well positioned to secure the opportunities in this business vertical. In the specialty chemical business, we continue to see healthy growth momentum supported by strong order visibility for the second half of FY27 and beyond. Our product pipeline continues to expand across both existing and new molecules, strengthening our portfolio of differentiated chemistries and supporting our growth prospects. During the quarter, we commissioned the de-bottlenecking of our MPP capacity at Dehage in September 2026, further enhancing our production capabilities. Moving on to CDMO business, we continue to see strong momentum with our FY27 target well within reach, supported by encouraging business developments and healthy product pipeline. I am pleased to mention, few of our existing molecules have seen positive developments in their end use with favorable results of the trials. Our engagement with leading European CDMO measure continues to deepen, driven by increasing demand for an existing molecule and expanding role in the customer's supply chain. From a strategic perspective in this vertical, we continue to focus on building a balanced portfolio of late-stage and commercial molecules complemented by early-stage programs. We are also expanding our presence across promising therapeutics areas, including oncology, cardiovascular, neurology, and animal health through engagements with global innovators. With this, I hand over the call to Anish for sharing the financial highlights.

Anish Ganatra, CFO

Thank you, Nitin. Good evening, everyone, and a warm welcome to the earnings conference call. Moving on to the financial performance for Q2 and first half FY27, let me begin with the key highlights for the quarter. On a consolidated basis, operating revenue for the quarter stood at 1,191 crore, registering a year-on-year growth of 57%. Operating EBITDA grew by 66% year-on-year to 407 crore, with margins expanding to 34.2%. Operating PBT increased by 87% to R$336 crore, while profit after tax rose by 81% to R$269 crore, reflecting the strong growth in both revenue and profitability. Turning to the half-year performance, operating revenue for first half F527 increased by 51% to $2,236 crore, supported by broad-based momentum across HPP speciality, chemicals, and CDMO businesses. Operating EBITDA grew by 69% to 765 crore, with margins expanding by 367 basis points to 34.2%. Operating PBT grew by 93% year-on-year to 619 crore, compared with 320 crore in first half FY26. Profit after tax also increased to 513 crore, a growth of 93% year-over-year. Our EPS stood at 100, and our net operating working capital days stood at 72 days, which is within our financial framework. With that, we can now open the floor for questions and answers.

Operator

Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Sanjay Jain with ICSA Securities. Please, go ahead.

Speaker 3

Yeah, good evening. Thanks for taking my questions. My first question is on the revenue bridge. All the three segments sequentially has grown impressively. Can you help us understand what has led to this sequential growth? Because prices and refcasses have largely been stable in the HPP. And specialty, I thought we were, except Corteva, most of the plant were running full. And in CDMO, I think there is more off-take in the European Union. How much more can we do there? Can you help us understand all the three segments, what is driving the growth? And from here on, what growth driver from the Q2 base? All right. Thanks, Sanjay. Good evening to you.

Anish Ganatra, CFO

I mean, sequentially, if you look at Q122, right, that's what you're referring to. Correct. I mean, if you look at it, the HPP business is largely grown, both from a benefit of pricing advantage in the business, there has been movement on prices.

Speaker 3

I mean, this is the danger of relying on averages, right?

Anish Ganatra, CFO

I mean, averages don't tell you what we kind of, our team's managed pricing. We've also had good volumes, because like we've said before, you know, our HF plan has come into play. So, volumes on HF are pretty good. That is helping. Also, Q on Q, we've had growth in the, or HIT business too, the HFO business of Solstice. So, that is also helping. Speciality, I mean, again, I refer back to my commentary, I think, probably in the last two, three quarters, where they've consistently said that this business will become more like a 350 crore business. Now, again, our philosophy in this business, given the global dynamics, is to extract more and more juice from the current assets. Our MPP plans, you know, and And the operational efficiency that we are doing allows us to do more campaigns in the same plants, you know, because of the way we are mapping the products and minimizing the steps. Also, our teams in R&D and Innovation are helping us do that. So, that's helping. I mean, in fact, if you see speciality MPP1, MPP2, we will have far exceeded the par by the end of this year, you know. So, in this environment, our teams are able to deliver that. CDMO, you know, there is growth both from the base business from Fermion as well as some encouraging new qualification campaigns that we've run too. So, that's helping. This is kind of the growth explaining from the sequential from quarter to quarter. Here on, if you look going forward, right, the growth will come. We recently commissioned the re-water making at the end of September, so you should start to see growth coming in from that in the speciality even beyond where we are today, because that hasn't been factored in the numbers.

Ranjit, Analyst — IIFL Capital Services Limited

You will also see growth coming in HPP from the news

Anish Ganatra, CFO

that's being commissioned shortly. Of course, it will ramp up incremental sort of growth coming in this quarter, but then full ramp up possibly in the next quarter. The GMO, of course, like we said, and I think Vishat and I both mentioned, you know, we are at the striking distance of our 100 million target in terms of order book visibility. And so there will be growth for that business too by the end of this year. And beyond that, again, we've already announced the phase two capex that will start delivering growth also in that vertical.

Speaker 3

Oh, that's great, Anish. Super explanation. I think what has impressed more in this quarter is that we were able to maintain the gross profit despite a very inflationary environment. What is helping us to hold on to gross profit while all our peers have struggled there?

Anish Ganatra, CFO

Vita bridges, no?

Speaker 3

The price actions, pricing actions we are taking, largely we are able to offset the sourcing impacts, okay?

Anish Ganatra, CFO

Also, what's happening for us is operating leverage is playing in, plus there's a lot of effort being done on operating efficiency, which is also helping capture and protect the Vita. Go forward, you know, this is something, and that's exactly the reason why Nitin brought out in his speech, you know, the fact that even in this environment, the commitment of the teams, the agility of the teams, is helping us navigate, and that's something that's going to be. Sorry, there's some disturbance there.

Speaker 3

No, no, sir, I'm there, I'm there, sorry.

Anish Ganatra, CFO

Okay. No, so, so exactly, you know, I mean, so we'll all have to remain committed and agile. You know, to respond to the geopolitical challenges, because I don't think we are out of the wind yet, you know, in terms of the geopolitics.

Speaker 3

Got it. One last question before I join back in the queue. The contract extension, I thought we had a higher headroom for the volume, but the implied contract for next four years implies a 45 million run rate annually versus a 58 million run rate. What are we missing in this?

Anish Ganatra, CFO

No, so the way you should look at these, there are two things happening here, right? One is the fact that the extension gives us a longer visibility and adds in about closer potential for revenue. We definitely will not add in leverage, you know, in terms of where we are. Second, you know, the pricing mechanism is always a pass-through mechanism in these contracts, right? So that's something to bear in mind, that as we go from now, if you've recovered your CapEx, there will be a different answer to it. So there's a lot to the commercial contract in the way they get structured, that you can't make a simplistic notion on the average rate. In fact, if anything, this contract is going to guarantee us larger volumes than what we had before.

Speaker 3

Spot it, Anishma. I think these are my questions. Thanks for answering all the questions, and best of luck for the coming quarter, and happy Diwali, and I

Anish Ganatra, CFO

will see you all. Thank you.

Operator

A next question comes from the line of Rohit Nagraj with 361 Capital. Please go ahead.

Speaker 7

Thanks for the opportunity, and congrats on, again, a good set of numbers. First one, on the clarification on the HFO contract. So, if we look at for the last seven years, the average run rate has been about $60-odd million. But for the next four years, it indicates $45 million. So, I just want a clarification in terms of whether the revenue run rate will moderate going beyond FI 29. And second question, allied to that, our own HFO commercialization, will that get delayed because now we will be supplying to R&L beyond 2030? Thank you.

Anish Ganatra, CFO

No, so I'll take the second one first. But, you know, if you think of this, Rohit, you know, at the end of the day, we will not get into the same application. But you and I both know There are 40 different varieties of HFOs, yeah? And so, as long as we are sort of not within conflicting of the contract, there is nothing to stop us to do that, yeah? And so, therefore, I don't think that means anything on whatever else we are doing on the other HFOs, yeah? We've also said before that as we do the other HFOs, we will be looking both at partnership models as well as product models, yeah? Depending on whatever suits best for us. In terms of your question on the contract and the average rate, like I was just telling Sanjay Shmo, you can't look at this in a very simplistic way, dividing by the number of years, because frankly, you know, if you had a certain pricing in mind, which you said even in 22 for the current contract or 2020 actually for the current contract, that pricing environment is different to what we are today, what will be in 28. The way to look at this is that on a same asset base, you're going to extend both the volumes, the revenues, and also the period. You know, this was a seven-year contract. This now becomes an 11-year contract. You know, so in other words, whenever we talk of our growth between now to FY30 and there was this question after 28, this particular thing actually addresses that the base is protected.

Speaker 7

Right, perfect. Second question on Timor, we've seen some delay and obviously there have been challenges in terms of geopolitical and other things. Just one clarification here that whether because of the delay in commissioning of the project, the qualification cycle also will get delayed or since we've been supplying the material in the interim, that qualification cycle will not have a delay.

Anish Ganatra, CFO

So, again, we've said this before, Rohit, you know, when you look at this project, we've been working with ChemOZ to co-develop this, you know. So, the project itself, which started from a tech pack and developing in the lab to the pilot scale and to supplying them currently to the initial capacity, the process routes are different. Right. So one, we are actually, the delay is more attributable to looking at the right process to go into the initial capacity, which then allows us to accelerate the larger capacity should there be demand. So in fact, the delay is a conscious choice rather than anything else between the partners. And this is evidenced by the fact that as we are coming to commission that asset, we already have orders in place coming in for the future quarters.

Speaker 7

Perfect. Thanks a lot, and all the best, and Diwali wishes to the entire team. Thank you.

Anish Ganatra, CFO

Thanks, then, to you.

Operator

Thank you. Next question comes from the line of Ankur Perival with Access Capital. Please go ahead.

Ankur Perival, Analyst — Capital Access Group

Yeah, hi, sir. Thanks for the opportunity and congratulations on a strong set of numbers. First question on the CDMO side. With phase 2 of, you know, the CGMP4 coming in, will it be largely used or consummated for fermion contact itself, or there could be newer molecules also which will be driving growth here?

Anish Ganatra, CFO

So CGMP4 phase 1 and phase 2, Ankur,

Ankur Perival, Analyst — Capital Access Group

are both dedicated plants to fermion.

Anish Ganatra, CFO

You know, so this is going to be completely dedicated plants.

Ankur Perival, Analyst — Capital Access Group

Sure, and so, you know, the follow-up question to that will be that, you know, since you mentioned there are three molecules that we are working on, and we are at an advanced stage for one of them, if I got that right, what are the timelines one should look at for the next phase of expansion here for the newer molecules?

Anish Ganatra, CFO

So, again, you know, you have to look at this that when we started to do the phase 2 GMP4 plan, we were already doing the warehouse all the way up to phase 6, and we are doing ETP all the way up to phase 5, right? So we can actually go to CGMP5 pretty quickly with the infra there, you know, in terms of the utility, etc. I mean, the developments that you're referring to are actually positive on two molecules. You know, if you picked it up, you know, one of the molecules has already received approval in China, and that's on fast track on FDA approval in the U.S. market. So that will sort of probably come in. Again, the other molecule is more about the potential expansion, label expansion of daralutamide itself, you know, and that again has promising concepts on value. I mean, we are very quick. So, you know, the moment we see and sense the utilization of our 2GMP plants coming to 70-80%, we will be triggering off phase 5. You know, there is absolutely no doubt in our mind on that. And I've said this before as well, come to 100 million number, we'll sort of be starting to knocking that door very soon.

Ankur Perival, Analyst — Capital Access Group

Sure, Anish. That's very helpful. Just second bit on the speciality chemical side, with, you know, Nectar looking to be ramped up probably, let's say, within this financial year, Fully utilization in terms of, you know, the peak revenue. How do you see that revenue piece picking up? Well, Camours is one to ramp that up. But apart from Camours and MPPT bottlenecking, any other projects that we are working on which will require separate dedicated capex?

Anish Ganatra, CFO

So we've got, like I said in my last commentary on core, we've got five molecules, new molecules to see the growth that you see, which Sanjesh was asking is actually out of those molecules as well. There are campaign orders for those molecules going all the way until the end of this year and beyond as well. So there will be growth coming from there. For Nectar, we have always clarified that FI27, we will be somewhere around 60-65% of the power, and the balance power will come into FI28, you know. So that's the ramp up sort of around the speciality business. And 350 as a run rate, we had said about last three quarters. So that's what you're seeing play out as well, you know. And it will go after because of the reasons we talked before as well.

Ankur Perival, Analyst — Capital Access Group

Yeah, yeah. So, great, sir. That's it from my side. Thank you and wishing you all a very happy Diwali. Thanks. Same to you, Ankur.

Operator

Thank you. Our next question comes from the line of Archie Joshi with Nuama Wealth Management. Please go ahead.

Speaker 7

Hi, good evening, everybody.

Anish Ganatra, CFO

Thanks a lot for the opportunity. Just one question. Any development on the DRDO, contract, any ramp or economics that

Speaker 6

we've been coming across and you can share anything on that account?

Anish Ganatra, CFO

So, hi, Ashit. So, DRDO, again, we are working for the schedule as described with the defense. So, that's going on track with them. Again, like we shared, this molecule has dual use. So, you know, as in when the product is developed, we will be accelerating the application in the pharma phase sooner than what time the defense takes, because that will take time from the defense side in terms of when they get comfortable, right, in terms of the qualification, etc. Again, you know the potential market over there, you know, even at 50%, just the Indian market is roughly about 400 crores in the pharma side, yeah?

Speaker 7

Sure, sir. Just one small bit again on the HF prices also have, you know, firmed up quite a lot in the entire onslaught within the world. Have you been able to benefit since we have also commissioned the capacity?

Anish Ganatra, CFO

I think again, you know, yeah, pricing as we know is an equation of cost, right? I mean, when you look at how HF prices have gone up, you should also look at how prices for sulfur, you know, gas, you know, A lot of raw materials has gone up, right? Flows power is also going up. So, you know, I mean, frankly, you know, I think in this sort of an environment, a 34% EBITDA is really a solid EBITDA that cannot come only from pricing, you know, that has to continuously come from the efficiency and the improvements we try within the organization. And that's going to be our month-wide.

Speaker 7

Right, sir. Of course, of course. Get that point. That would be all from me. Wishing you a very happy debate. Thank you.

Anish Ganatra, CFO

Thanks. Same to you.

Operator

Thank you. Our next question comes from the line of Arun Prasad with Evendor Spark. Please go ahead.

Speaker 6

Yeah. Good evening, everyone. Thanks for the opportunity. Anish, my first question is that I think, first of all, it's impressive that we have reached the 3DMO target of 100 million on a 100 basis much earlier than we initially said. Following up that, am I right if I assume that for including the phase 2, the new target will be somewhere close to 1,200 to 1,300 crores?

Anish Ganatra, CFO

So, Arun, again, we have always been saying that it's not early, it's actually on time, and we've been saying this for some time now. We have also said that CGMP4 Phase 2, when Phase 1 and Phase 2 put together, the peak annual revenue potential is close to 3x of the capital, or about 900 to 1,000 crores, by F529, if I am not mistaken. So that's also on track. The molecules that we talked about, the label expansion for darolutamide, the approval for the other molecule in the China jurisdiction, which then gives a greater confidence of approval in the other jurisdictions, is all positive development. So, you know, envisaging a growth beyond FY27 in the numbers that you talked about is not sort of unimaginable.

Speaker 6

Understood, sir. Second, I think given the growth that we are seeing in all the three segments, inevitably we are going to have a post-tax OCF of more than 1,200, 1,300 crores in a steady state, but so far we haven't announced obviously something will be in the plans, but how should we see your CapEx? Will the CapEx will continue at the current rate, or we will have a lot of surplus free cash flow, which we will be distributing to the shareholders? How should we think in this capital allocation perspective?

Anish Ganatra, CFO

So, like I've said before, you know, our CapEx frame will be in the 700 crore this year is what we are looking at, given where we are. I think the first half captures something under 10 crores. So, you know, we are on track for what we are saying we would do this year on the lower end of that. We are working on several projects, you know, and as these projects kind of mature through our stage gates, you will see CapEx being announced. We're very conscious of the fact that with the CapExes we have in place, our growth to FY28 is pretty much baked in. Some part, of course, goes to 29, like the CGMP4 that I was talking about. But there will be other projects that will come in to capture the growth before, and our portfolio is looking quite healthy and reached on the pipeline, yeah?

Speaker 6

Sir, one more clarification on the HFO contract extension. It's very clear that from what you said, we'll have some reduction in the gross margin at the portfolio level, but should we also extend incremental volume? Should it result in a margin accretive at EBITDA level, sir?

Anish Ganatra, CFO

So, incremental, I mean, you know, when we are growing at the rate of 20-25% annually, our costs are not going to grow at that rate. You know, the question is, what will be the bidda in the future? We are not going to change the guidance from 30% because, frankly, I will be the first one, future, long term, we

Operator

are not going to change the guidance from 30%.

Anish Ganatra, CFO

I am not talking of the year, I am talking long term, right? The reason for that is that I will not sit here and let you believe that I have full knowledge of the future. In fact, if at all, our cognitive ability does not allow us to predict the numbers for five years and six years, only with our margins. The geopolitics are massively volatile, as you all know, so we'll figure that out. For this year itself, for FY27, just to be clear, we are going to be working on the margins that you see for the first half. You know, in the same sort of range for the year. That's what we'll be working towards.

Speaker 6

Understood, sir. I also heard that you spoke about the HF placement, if I heard it rightly. So that means are we selling it in the domestic market also, the HF, from the HF plant?

Anish Ganatra, CFO

Sorry, I missed that. What did you say?

Speaker 6

Sir, I heard that you, something like you talked about HF placement in the market. So can you clarify that bit, please?

Anish Ganatra, CFO

No, I was saying that from a rev gas point of view, everybody talks of averages and you know the danger of averages does not recognize the superlative ability of teams to place the product in the right prices in the market. So we're doing better than the average. So therefore, to look at the average and say that you've not had any upside from the rev gas environment would not be a fair statement. That's what I was trying to say. And, of course, on the HF side, you know, we've always said that our merchant sales would be an X number. Today, we are seeing that it's actually far larger than that that we're able to place. You know, and some of the material that we are placing is also going in the international markets and also serving high-pure HF as well. Okay.

Speaker 6

So, if you can clarify, what is our HF utilization rate, sir, at this point of time?

Anish Ganatra, CFO

So, we wouldn't want to talk of utilization rates. I mean, rest assured that we've said it's being ramped up, so it's not hit the full capacity, yeah? So, it is being ramped up, and it's a large plant, so there is going to be more time, you know, to kind of hit the full capacity.

Speaker 6

Understood, understood. Thanks for answering all the questions, sir. All the best.

Anish Ganatra, CFO

Thanks, again.

Operator

Thank you so much. Ladies and gentlemen, anyone who wishes to ask a question, may press star in one. Our next question comes from the line of Aditya, I am here with HDFC Securities. Please go ahead.

Aditya, Analyst — HDFC Securities Limited

Hi, am I Aditya?

Speaker 3

Yes, you are.

Aditya, Analyst — HDFC Securities Limited

Congratulations on a great set of congrats as of this question. On the ChemOrds project, what early indicators are we observing on OEM engagement? And under what conditions would the proposed 10x scalar be triggered?

Anish Ganatra, CFO

So again, we've talked about this Aditya. So, one, this is more a ChemOS conversation than a Naveen conversation, but I'll help you in as much as I can. I can't talk about specific numbers, etc. on the project. We are under an NDA, but if you look at what's available in the public domain, you will see that ChemOS, earlier in this year, qualified its product with a French company called 2CRSI, And they are one of the OEM manufacturers of high-compute kits, you know, so they do 1U architecture. They've actually, that's been a joint development agreement with them. So this then accelerates the adoption in the, as you know, anybody that establishes hyper-computing, you know, environments is likely to use OEMs to qualify their materials, etc. So, it's very encouraging. I think the fact that as we commission the project and we have line of sight and purchase orders in hand from Chemosh, again, signals that there is demand for the adoption that's coming through. We'd always said it would take about 15 months once the project is commissioned to know what the adoption rate is in the market, what the size of that market is, and hence what the capex will be. So, a bit premature to talk about the final, eventual CapEx that will result at the end of all of this.

Aditya, Analyst — HDFC Securities Limited

Okay, that's it from the end. All the gifts to the team and wishing you a happy day.

Anish Ganatra, CFO

Thank you.

Operator

Our next question comes from the line of Sanjay Satpati with Ampersand Capital Investment Advisors. Please go ahead.

Sanjay Satpati, Analyst — Ampersand Capital Investment Advisors

Hi, sir. I just wanted to confirm that your annual capex, you said that will stay at around 7, 750 crore this year as well as next. Is that correct?

Anish Ganatra, CFO

I said a capex frame. So what I mean by that is we've built a very strong balance sheet, you know, and a very strong capital frame, which allows us to hold our working capital to 70 to 75 days, you know, and all of that means That means that we are able to generate an EBITDA conversion of 60%, which 60-65% on a more sustainable basis, and that then translates the ability to spend. So, we've got the ability to spend 700 to 1,000 crores every year within our CapEx frame, which is good enough both from a point of view of the project hopper that we have in our line of sight, as well as the growth that we are targeting over the next five years, right? So, in some years, you will find the capex on the lower range. Some years, on the higher range, it will end somewhere in the middle every year, right? So, this year, I've said that we are looking at 700 crore. Next year, as we come towards the end of this year, there are several projects in the hopper. Depending on what comes in and gets approved through our state-scale processes, we will be announcing those capexes, and they will certainly then be more clear in terms of what we will spend. Does that help?

Sanjay Satpati, Analyst — Ampersand Capital Investment Advisors

Yes, yes, this is very helpful. And last question, can you just articulate that among the three segments that you have, over the next three-year, will there be a significant shift away from HFC business in your overall revenue mix or investment mix?

Anish Ganatra, CFO

No, I think we are going to build on the businesses we have, And we, as we've also said, that we are incubating a new business vertical called Advanced Materials, which is, again, we've given out when we spoke at the last call, that if you think of Naveel from now to 2030 and look at 20 to 25% growth, Advanced Materials will be roughly about 10% to 15% of the expanded pie by 2030. But that's a milestone. That's not the end of the journey. This is a growth business we are looking for the next decade.

Sanjay Satpati, Analyst — Ampersand Capital Investment Advisors

Understood. Thanks a lot, sir. Wonderful to see your success story panning out the way it is. Thank you, sir. Thank you, Sanjay.

Operator

Thank you. Our next question comes from the line of Jason Soans with IDBI Capital. Please go ahead.

Jason Soans, Analyst — IDBI Capital

Yes, sir. Thanks for taking my question. That's a very strong set of numbers. Sir, I just wanted to know, I mean, if I remember correctly, the utilization for the HFO plant, end of FY26 was around 80%. So, sir, I just wanted to know, I mean, of course, you have an extension now, and so, when you look at the average kind of utilization over the years, are you expecting it to be around 90%, 80%, 90% only going ahead, even, you know, going beyond 29%, so?

Anish Ganatra, CFO

So, we won't, you know, the utilization will improve. I mean, as you know, this product goes into two sort of end applications, right? And as the global market scenario improves over time, you will see the demand going up in the construction sector. And of course, this also gets used in chillers for high cooling, etc. So, demand is expected to go in that side too. So, we will see the volumes go up. What we've indicated there is the numbers that we see as potential based on the minimum quantities or minimum expected quantities from the customer, yeah.

Jason Soans, Analyst — IDBI Capital

And so, earlier you did speak about, you know, working on the five molecules in the second phase, and you said there are good, you know, orders, campaign orders for these molecules. So, do we see any visibility for any dedicated plants or any going ahead for any of the molecules?

Anish Ganatra, CFO

See, we've always said that in the ag market, we remain constructive of the long-term fundamentals of the demand for agri-products, right? Our approach to navigating and accessing that growth is going to be to utilize the current assets and juice them up more and more, which is why we confidently said that when you look at F527 at the end, you will see that our power of MPP1 and MPP2 will have been far exceeded. Because we've done a lot of work in terms of making sure that more products can be mapped into those plants. And these molecules will get not only mapped into those plants, but also in the tea bottle making space. So all in all, will we see a new kind of MPP? I think it's a hypothetical question at this stage. Our approach is going to remain to extract more and more from the current asset. If there was something that would come up there from a business that would demand a dedicated capacity, of course, we'll openly look at the commercials, etc. If it passes through our stage gates, we'll go through the approval and announce it in the market.

Jason Soans, Analyst — IDBI Capital

On the last call, you had said that in CDMO space, you're working on 10 molecules, 3 molecules expected to have a readout in the next 8 to 12 months, you know. So, there is a healthy pipeline, clearly. So, I just wondered any update or any new thing you would want to share on that front? How is that pipeline looking?

Anish Ganatra, CFO

Yeah, in fact, I just said earlier in the call that you have got two of those molecules where the progress is very encouraging. So, you know, in the near term, that's the update that I can share, actually. I mean, I'm happy to repeat it unless you missed the earlier comment, you know.

Jason Soans, Analyst — IDBI Capital

No, sir, that's fine. And so, just one clarification I missed out. You did mention that certain plants for the CDMO are basically dedicated to the darolutomide of the Permion contract. So, could you just repeat what exactly is dedicated for the darolutomide?

Anish Ganatra, CFO

Dedicated means that it's been customized to run and optimize for the molecule that we require for that particular product. So, dedicated means we would not do match product changes, campaign changes, it would run that product day. I mean, I don't know another word for dedicated, but that's possibly where I can explain it.

Jason Soans, Analyst — IDBI Capital

Yeah, yeah, that was a bit, okay, okay, okay. Sure, sir. That's all from my side. Thank you so much.

Operator

Thank you. Next question comes from the line of Ranjit with IFL Capital Service Limited. Please go ahead.

Ranjit, Analyst — IIFL Capital Services Limited

Thank you for taking my question, and congratulations on a very strong set of numbers. My question is on the HFO pricing environment.

Operator

Ranjit, I am really sorry, but can you just be a little loud? Thank you.

Speaker 3

Is this better?

Anish Ganatra, CFO

Yes, as loud as you can.

Ranjit, Analyst — IIFL Capital Services Limited

Yeah, let me use the handset just a second.

Speaker 3

Yeah, sir. This is good.

Ranjit, Analyst — IIFL Capital Services Limited

Let's try.

Speaker 3

Go on.

Anish Ganatra, CFO

Yeah.

Ranjit, Analyst — IIFL Capital Services Limited

Yeah. So, I was saying, sir, thank you for the opportunity and congratulations on a great set of numbers. My question is on the HFO pricing environment. How do you see the global HFO pricing environment evolving over the next few years, particularly as the pretence expires and the competition increases?

Anish Ganatra, CFO

No, so if you are referring to, sorry, I didn't mean to cut your question, but you'll have to be a little bit louder. So your last part was very faint.

Ranjit, Analyst — IIFL Capital Services Limited

Yeah, so my question was largely on the global HFO pricing environment. How do you see it evolving post the patent expiry? And in relation to that, the extension that we have seen does offer some bit of a comfort on the realizations.

Anish Ganatra, CFO

No, I think the way you have to understand these markets, one, there is, you know, each HFO has a different application, and largely the patent owner will also cover a qualification route for the use of the product. So, we've always said that, you know, in our discussions with Solstice, you know, they've always indicated that this product is an evergreen product in terms of the end-use application that they're looking for. So, in fact, like I've said before as well, the extension is not just the time extension, but there is expectation that the volumes will be larger too.

Ranjit, Analyst — IIFL Capital Services Limited

So, any comfort on the realization that you have got from them?

Anish Ganatra, CFO

Comfort on the realization, yes, of course. I mean, in what way do you mean? I mean, we've already given the numbers out as potential revenue numbers, And that's all. I think that should be good enough, no, Ranjit?

Ranjit, Analyst — IIFL Capital Services Limited

Yeah, right. So my question was largely if you see there is a large difference between the HFO and the other refrigerants. And eventually when these will have a patent expiry, the expectation is that there will be competition and the price erosion will help.

Anish Ganatra, CFO

No, so I think you are looking at the ref market and HFO in the ref market. This product is slightly different even if it's an HFO. Similarly, the Chemo's product is again a different HFO. So, you know, Chemo's product is a different application. Solstice is a different application. You have to look at it from the end applications. You know, if you're looking at the REF market, I mean, the global HFO capacity is 10% of the global REF demand in tonnage terms. You know, I mean, there's not enough volume there to kind of play in the market and the pricing. So, whichever way you look at, HFO is a product that is on the higher pricing side, you know, in the end market for the end application itself, because it is a more greener product, more cleaner product. So, it's going to come at some sort of premium, right?

Speaker 3

Thank you.

Ranjit, Analyst — IIFL Capital Services Limited

That was all for myself.

Operator

Thank you so much. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, T. All right.

Anish Ganatra, CFO

Thank you all for taking the time today and be with us on behalf of the Naveen team and Cygnus. We wish you all a very happy Diwali and a happy new year in advance. Thanks again.

Operator

Thank you so much. Ladies and gentlemen, on behalf of Naveen Flory International Limited, that concludes today's call. Thank you for joining us. And you may now disconnect your lines.