Background: Vinati Organics Limited (VOL) was established in 1989 to manufacture specialty organic chemicals. It has since grown to become the world's largest manufacturer of IBB & ATBS and India's largest manufacturer of IB & HP MTBE. The company's products are exported to customers in countries across Europe, America, and Asia. Competitive edge in niche specialty chemicals Cost leadership & scale economies in IBB and technological entry barrier in ATBS. The company started with a small capacity of 1,000 TPA and gradually expanded to 26,000 TPA today for its ATBS production, capturing 60% of the market share. The company also commands more than 65% market share in the world for IBB. With consistent investments in technology and...

The de-growth in sales YoY is largely attributed to de-growth in ATBS and IBB volumes. Gross margins improved by 442bps YoY and 509bps QoQ on account of benign RM costs. EBITDA/PAT degrew by 15.1/9.6% YoY to Rs 1.0bn/Rs 746mn respectively. Employee costs were up 21.9% YoY to Rs159 mn, a higher other income up by 57.8% YoY to Rs 162mn and a lower tax rate of 31% against 33% in 4 shielded PAT to Rs 746mn. Vinati Organics has commissioned Butyl Phenols plant and is expected to...

Chemical companies are directly/indirectly cater to essential sectors such as pharma, agrochemicals, foods, edible oils. Despite having obtained the permission to resume manufacturing in Q1FY21, lack of demand and logistics challenges, particularly supply of finished goods (within India and internationally), force these companies to either keep their plants under shut down or operate at lower utilization. Given the B2B nature of their business, the coronavirus outbreak has had a limited impact on the earnings of chemical companies in our coverage universe. However, owing to logistical challenges for man/materials, plant shutdowns, shortage of manpower and plunge in demand in FY21, we have cut our earnings estimates by 10-39%.

VOL posted a substantial fall in revenues measuring to 21.3% y-o-y in Q3FY20 (Rs. 238.47 cr vs Rs. 303.05 cr) on the back of lower realizations and stumbling revenues from its marquee product ATBS due to stunted oil prices. VOL's clients' desire to keep truncated inventory levels in December also contributed to plummeting top line.. IBB volumes remained low; given our understanding, BASF - a major customer is facing challenges with Ibuprofen manufacturing. With just a handful of customers in the global...

Vinati Organics Ltd (VOL) enjoys global leadership in two specialty chemicals, with market share of 70% in IBB (isobutyl benzene) and 80% in ATBS (2-Acrylamindo 2-Methylpropane Sulfonic Acid). We upgrade VOL to Hold as a we have a positive outlook on the VOL in the longer term given capacity expansion in ATBS, launch of new products and superior margin profile. Further, it is trading at 1 Year FWD P/E of 19x which is 35% discount to last 5 year average, which seems to be attractive. 9MFY20 Revenue de-grew by 5% YoY, on account of lower off-take...

We like VO for its (1) Impeccable product selection (2) High market share globally (3) Best in class return ratios and earnings trajectory. However, in the absence of new product pipeline, we believe current valuations are contextually high at 31.1/26.1x FY21/22E PER. Our TP of Rs 2,040/share is based on a 25x Dec-21E EPS. We downgrade VO to NEUTRAL post an underwhelming performance in 3QFY20. Given a demand slowdown for the high margin ATBS and resultantly lower realizations, we cut our EPS estimates for FY21/22E by 13.5/12.6%.

Background: Vinati Organics Limited (VOL) was established in 1989 to manufacture specialty organic chemicals. It has since grown to becom e the world's largest manufacturer of IBB & ATBS and India's largest manufacturer of IB & HP MTBE. The company's products are exported to customers in countries across Europe, America and Asia. Competitive edge in niche specialty chemicals Cost leadership & scale economies in IBB and technological entry barrier in ATBS. The company started with a small capacity of 1,000 TPA and gradually expanded to 26,000 TPA today for its ATBS production, capturing 60% of the market share. The company also commands more than 65% market share in the world for IBB. With consistent investments in technology and capacities, the company is the largest producer of IBB in the world with a capacity of 16,000 TPA....

VO has corrected 17% from its peak (Sep-19) and is trading at 22.8/19.4x FY21/22E PER. We believe it should command premium valuations owing to (1) Its impeccable product selection (2) High market share globally (3) Best in class return ratios and earnings trajectory. We upgrade VO to BUY despite muted performance in 2QFY20. VO will generate RoE of 30.5/27.1/24.8% and RoIC of 29.6/30.7/33.1% in FY20/21/22E. Valuations are contextually low at 22.8/19.4x FY21/22E PER. Our TP of Rs 2,331/share is based on a 25x Sep-21E EPS.

Vinati Organics Ltd (VOL) enjoys global leadership in two specialty chemicals, with market share of 70% in IBB (isobutyl benzene) and 80% in ATBS (2-Acrylamindo 2-Methylpropane Sulfonic Acid). Q2FY20 Revenue de-grew by 3% YoY, but PAT grew by 69% YoY led by higher operating profit and corporate tax cut. EBITDA margins improved by 310bps YoY to 40.7% due to softer RM price and higher contribution from ATBS. We continue to maintain our positive outlook on the VOL given capacity expansion in ATBS and launch of Butyl phenols, which is expected to drive growth for 2-3 years....

000 TPA. In anticipation of the accelerating demand for ATBS, VOL decided to increase its existing ATBS TBS capacity to 40000 TPA by September 2019, however, due to delays it is expected to be completed by November. The rising demand for ATBS and withdrawal of Lubrizol from the ATBS...

VO has been commanding a premium in valuations due to an impeccable history of product selection and best in class return ratios (ROE and RoIC for FY20/21E will be 27.6/25.1 and 26.3/27.2%). However, we expect ATBS volume growth to taper and blended margins to correct with increase in the share of low-margin Butyl phenols. With the PAP project back to laboratory testing and no other products in the pipeline, we maintain NEU on VO. Post an underwhelming performance in 1QFY20, we cut our EPS estimates for FY20/21E and arrive at a TP of Rs 1,986/share based on a 25x Jun-21E EPS. We maintain NEUTRAL.

Sales/EBITDA/PAT were largely flat. Sales were lower than our estimate of ` 3.19bn, while EBITDA and PAT were largely in-line (D.est: EBITDA/PAT: ` 1.18bn/785mn). VO reported a strong gross margin expansion of 720 bps YoY and 240 bps QoQ at 57.7%, bulk of the expansion in margins can be attributed to sustained ATBS prices. VO reported the highest ever EBITDA margin of 41.3% up by 670 bps YoY and 95 bps QoQ. Guidance moderated amidst delays in commissioning The management has lowered the Sales and PAT guidance to 15.0% YoY in...

Vinati Organics Ltd (VOL) enjoys global leadership in two specialty chemicals, with market share of 70% in IBB (isobutyl benzene) and 80% in ATBS (2-Acrylamindo 2-Methylpropane Sulfonic Acid). Revenue and PAT grew by 39% & 59% YoY led by strong volume growth in ATBS and better operating performance. EBITDA grew by 84% YoY while margins improved by 980bps YoY...

Strong traction in ATBS will continue owing to robust demand and shortage of global capacity. VO is expanding its ATBS capacity by ~46% to reap the benefit of the situation. Besides, the company will add Butylated Phenols to its product basket. This too, will drive volume growth in FY20/21. VO has been commanding a premium in valuations due to an impeccable history of product selection, best in class return ratios (ROE and RoIC for FY20/21E will be 27.9/26.5 and 26.1/28.6%). Therefore, we value Vinati Organics at 25x Mar'21 EPS with a target price of Rs 2,034/share. We maintain BUY on Vinati Organics (VO) after beat on our estimates. Our target is Rs 2,034sh (25x Mar-21E standalone EPS).

of firm realizations from new clients and robust volumes. Its pricing policy also helped as VOL charges arges a fixed margin from its clients which help it to methodically transfer the higher costs of fluctuating raw materials to customers during volatile crude oil price scenarios. Margins for 9MFY19 also rose dramatically by 750 bps to 35%...

Vinati Organics Ltd (VOL) enjoys global leadership in two speciality chemicals, with market share of 70% in IBB and 80% in ATBS. Revenue and PAT grew by 63% & 123% YoY led by strong volume growth in ATBS and demand uptick from other segments. EBITDA margins improved by 830bps YoY to 35.1% due to strong volume growth and higher contribution from ATBs. We expect the current growth momentum to continue led by pick-up in demand from IBB and customised products....

We are valuing Vinati Organics 25xDec'20 EPS with a revised target price of Rs 1,840. Vinati Organics (VO) reported another strong quarter with Sales/EBITDA/PAT coming in at Rs 3.03bn/1.06bn/ 707mn growing at 63.2/113.6/122.8% YoY respectively. VOs planned expansion in ATBS and Butylated Phenols is going as per schedule

EBITDA margins improved by 900bps YoY to 37.7% due to better product mix and benefits from scale. Limited competition in ATBS, pick-up in demand from IBB and customised products, we expect current growth momentum to continue. Robust demand outlook for ATBS and launch of new products in next 12 years has significantly improved future outlook. We upgrade our earnings estimates by 18% & 16% for FY19 & FY20E to factor in impressive earnings in Q2FY19. Given strong earnings outlook and RoE of 26% (last 5yrs), we maintain...