CD Equisearch has given Hold recommendation for Vinati Organics with a target price of Rs. 1639 in its research report issued on Aug 30, 2021

CD Equisearch’s research report on Vinati Organics

Fortune Business Insights pegs the specialty chemicals market to stand at $882.6 billion in 2028 growing at a CAGR of 4.7% during forecast period. Much of the vibrancy in this growth would largely be driven by growing demand in end-user industries such as pharmacy, FMCG, agro-chemicals, personal care and food segments & improved export demand. Especially, increase in adoption of agrochemicals on account of growing population base combined with rising food demand would be fuelling the growth in the market. The Asia Pacific region is expected to dominate the market during the forecast period largely attributable to the huge production base concentrated in India and China. Due to stricter environmental norms, tighter financing, and consolidation, there has been a decisive shift in the structure of China’s chemical industry propelling western countries to adopt ‘China Plus One’ business strategy. This coupled with stringent policies in regulatory norms, slow economic growth and rising cost of labor across globe has also improved the sales volume of domestic specialty chemical manufacturers.

Outlook

ROCE is expected to increase this fiscal (21.5%) on account of impressive growth and moderate to 21.6% next fiscal. Yet the current valuation leaves little scope for appreciation. So we assign ‘hold’ rating on the stock with target price of Rs. 1639 (previous target Rs 1072) based on 40x FY23e EPS of Rs 40.97.

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