Motilal Oswal has given Buy recommendation for Vinati Organics recommended buy rating on the stock with a target price of Rs 2230 in its research rep with a target price of Rs. 2230 in its research report issued on Feb 01, 2022
Motilal Oswal’s research report on Vinati Organics
VO reported a miss to our EBITDA estimates, with a marginal improvement in gross margin QoQ to 49% (+100bp QoQ). Revenue was impacted in 3QFY22 primarily due to lackluster seasonal demand of ATBS. The management has maintained its conservative EBITDA margin guidance of 30% as it expects operating costs to remain around similar levels, with Butyl Phenols being sold at a lower margin, as VO is a new entrant in this segment. It guided at sales growth of 50% YoY in FY22 and 25-30% YoY in FY23 and FY24, led by a recovery in IBB from Feb’22, commissioning of an antioxidant plant, and foray into niche chemicals through Veeral Organics. It plans to achieve full utilization of Veeral Additives in the next three years post commissioning in FY22-end. Capex of INR3b for the same is nearly done. Our FY22 revenue growth of 59% is higher than the aforementioned guidance. We forecast a revenue CAGR of ~38% over FY21-24E (unchanged), translating in an EBITDA/EPS CAGR of 30%/29% over the same period.
The stock has underperformed in the last six months and remained flat on the back of concerns related to margin dilution. A gradual ramp-up in expanded capacity over the next three years will drive growth for VO. We value VO at 40x FY24E EPS to arrive at our TP of INR2,230/share. We maintain our Buy rating.
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At 17:30 Vinati Organics was quoting at Rs 1,921.65, down Rs 28.45, or 1.46 percent.
It has touched an intraday high of Rs 1,960.00 and an intraday low of Rs 1,916.40.
It was trading with volumes of 2,250 shares, compared to its thirty day average of 2,582 shares, a decrease of -12.85 percent.
In the previous trading session, the share closed up 0.55 percent or Rs 10.65 at Rs 1,950.10.
The share touched its 52-week high Rs 2,180.40 and 52-week low Rs 1,205.00 on 08 October, 2021 and 08 February, 2021, respectively.
Currently, it is trading 12.08 percent below its 52-week high and 59.09 percent above its 52-week low.
Market capitalisation stands at Rs 19,751.11 crore.