Stock To Buy: Anand Rathi Suggests Buying This Stock, Revenue Grows To Rs. 4.9bn, Amalgamation Approved



Target Price, CMP, and company performance

The Current Market Price (CMP) of Vinati Organics is Rs. 2060. Anand Rathi has estimated a Target Price for the stock at Rs. 2350. Stock is anticipated to give a 14.07% return, in 1 year.

Stock Outlook  
Current Market Price (CMP) Rs. 2060
Target Price Rs. 2350
1 year return 14.07%

Strong demand in ATBS, more utilization of butyl phenol, and a pick-up in IBB demand helped Vinati’s 74% y/y, 32% q/q revenue growth to Rs. 4.9bn. Revenue from ATBS grew 25-30% y/y. Because of higher other income, PAT growth was more than that of EBITDA, rising 43% y/y, 22% q/q, to Rs1,011m, partially hurt by higher tax expenses. Higher RM prices pushed down the gross margin a huge 1,312bps y/y, 287bps q/q, to 46.1%. The company expects Rs7bn revenue over the next three years at full capacity utilization.

Additionally, Vinati’s Board has approved the Veeral Additives Pvt. Ltd. amalgamation with itself. On this, Vinati’s butyl phenols will be the key raw materials in Veeral’s manufacture of antioxidants. The company will be the largest and only integrated manufacturer of such antioxidants in India.

Valuation and stock outlook by Anand Rathi

Valuation and stock outlook by Anand Rathi

Commenting about the advantages of the stock, Anand Rathi said, “We like the company and expect the strong growth momentum to continue on a pick-up in ATBS demand, greater utilization of butyl phenol and the Veeral amalgamation. 65-70% comes from exports and the company is experiencing good demand from Europe and America for all products. Demand from Asia is good, too, but shipping issues and longer lead times have curbed supplies. The company guided to Rs4bn CAPEX in the next two years. Revenue from Veeral Additives and Veeral Organics would start in FY23 and FY24. Management talked of ~25% revenue growth in FY23. It guided to maintaining 28-30% EBITDA margins.”

The brokerage firm stated, “We are positive on the long-term performance of Vinati and expect revenue/EBITDA/PAT to clock 27%/34%/32% CAGRs over FY22-24 considering strong demand driven by a pick-up in butyl phenols, antioxidants, and ATBS utilization. Demand for IBB was dull as off-take was high in FY21, resulting in more stocks with customers. It has been normalizing from Jan’22 and would support volume growth in FY23.” Anand Rathi has valued the stock at 40x FY24e EPS, 31x FY24e EV/EBITDA.

However, delay in expansion and scaling up from laboratory to commercial production and slowdown in R&D remain the key risks.

About the company: Vinati Organics

About the company: Vinati Organics

Vinati Organics is a leading manufacturer of specialty chemical and organic intermediaries with a sustained market presence spanning over 35 countries in the world. Since its inception in 1989, they have evolved from being a single product manufacturer to an integrated business, offering a wide range of products to some of the largest industrial and chemical companies across the US, Europe, and Asia. It is the largest producer of IBB and ATBS, globally.

However, higher freight costs squeezed margins. The EBITDA margin contracted 688bps y/y to 28.6% due to the lower gross margin, though partially countered by better absorption of fixed cost on greater utilization across products. The company has seen a 24% CAGR growth in net profits, and a 16% CAGR growth in revenues since 2010.



The above stock was picked from the brokerage report of Anand Rathi. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.


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