Sharekhan has given Buy recommendation for Vinati Organics with a target price of Rs. 1550 in its research report issued on Feb 04, 2021
Sharekhan’s research report on Vinati Organics
Q3FY2021 results were weak with 6% miss in operating profit at Rs. 72 crore (down 13.1% y-o-y) due to higher cost (given commissioning of Butyl Phenol plant) and weak revenue mix (ATBS share at 38% versus 56% in Q3FY2020 and specialty products at 6% versus 17% in Q3FY2020). Management has guided for strong revenue growth of 20% each in FY2022 and FY2023 as its key ATBS segment has recovered to pre-COVID level and likely ramp-up of utilisation at Butyl Phenol plant. Thus, we expect a strong 29% PAT CAGR over FY2021E-FY2023E. Amalgamation of Veeral Additives Private Limited (subject to NCLT approval) seems in right direction as it provides entry into antioxidants (AO – forward integration for Vinati Organics) with incremental revenue opportunity of Rs. 300 crore.
Outlook
We like Vinati Organics’ business (global market share of 65% each in IBB and ATBS), debt-free status, and solid return profile (RoE/RoCE of 23%/30%). Hence, we maintain our Buy rating on Vinati Organics with an unchanged PT of Rs. 1,550.
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