Anand Rathi has given Buy recommendation for Vinati Organics with a target price of Rs. 2350 in its research report issued on May 17, 2022

Anand Rathi’s research report on Vinati Organics

Steep RM price hikes hurt Vinati’s gross/EBITDA margins 13%/7% y/y to 46%/29%. Further, higher freight costs squeezed margins. We like the company and expect the strong growth momentum to continue on a pick-up in ATBS demand, greater utilisation of butyl phenol and the Veeral amalgamation. Volume-driven growth. Strong demand in ATBS, more utilisation of butyl phenol and a pick-up in IBB demand helped to Vinati’s 74% y/y, 32% q/q revenue growth to Rs4.9bn. Revenue from ATBS grew 25-30% y/y. Higher RM prices pushed down the gross margin a huge 1,312bps y/y, 287bps q/q, to 46.1%. 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 utilisation across products.

Outlook

We maintain our Buy rating at a target price of Rs2,350, valuing the stock at 40x FY24e EPS, 31x FY24e EV/EBITDA.

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