Sharekhan has given Buy recommendation for Vinati Organics with a target price of Rs. 1750 in its research report issued on Feb 18, 2021
Sharekhan’s research report on Vinati Organics
We expect Vinati Organics earnings cycle to gain momentum with volume ramp-up for ATBS/Butyl Phenol and sharp recovery in EBITDA margin with improvement in revenue mix towards high-margin ATBS segment (from a low of 37% in 9MFY2021 versus 57% in FY2020). Our positive stance on ATBS demand (key input for oil industry) and margin recovery is underpinned by expectations of a 5.5-mbpd increase in oil demand in CY21 (as per IEA) and likely higher ATBS realisation (rising demand and increase in acrylonitrile prices). Overall, we expect a 33% revenue CAGR and 284bps margin expansion over FY21E-FY23E, which would drive strong 32% PAT CAGR over the same period. Vinati Organics’ dominant market share in ATBS/IBB, debt-free status and solid RoE of 24% makes us constructive on the company.
Improving near to medium-term earnings growth visibility and sustained long term high double-digit growth potential warrants higher valuation multiple for Vinati Organics. Hence, we maintain Buy rating with revised PT of Rs. 1,750.