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...

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). Q2FY21 revenue declined by 11% YoY as contribution from ATBS business declined due to slowdown in oil & Gas sector. EBIDTA margins fell by 240bps YoY to 38.3% due to lower contribution from high margin ATBS is the sales mix. Given weakness in Oil & Gas, we expect revenue & profitability growth to be subdued in the near term. But we expect revival in...

Vinati Organics' (VO) 2QFY21 performance was below overall expectations. Miss on revenue/EBITDA/PAT was to the tune of ~6%/~11%/~11%. Overall revenue declined by ~12% YoY during the quarter. We believe that the ATBS segment (~50% revenue share in FY20 as per our estimate) continues to decline significantly, which has impacted overall revenue and profitability. Oil & Gas sector's exposure to ATBS is ~30%, which is the cause for concern during FY21; other end-user industries like water treatment chemicals, plastic additives etc. are doing well. The performance of IBB and existing IB derivatives is tracking expectations. We expect higher growth in...

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...

We upgrade our rating to Accumulate given capacity expansion, launch of new products and superior margin profile. Q1FY21 revenue declined by 20% YoY led lower contribution from ATBS business due to slowdown in oil & Gas sector. Despite sharp fall in revenues, profitability was cushioned by higher contribution from superior margin IBB business. Going ahead, revenue growth is expected pick-up in H2FY21E led by...

BSE: BSE reported lower-than-expected revenue and margin performance in the quarter due to a fall in listing income (-20% QoQ). The core revenue stream improved (transaction charges +20.7% QoQ), led by a jump in cash volume and StAR MF. EBITDA margin was in negative territory (-7.6%) due to a drop in revenue and fixed cost structure. BSE cash market share declined to 6.2% (-113bps YoY) despite a jump in volumes, which we believe can be regained through smart order routing. The StAR MF platform is witnessing strong volume growth (+52% YoY), but realisation will fall from 2Q due to lower pricing. BSE is trying to fight back and build the derivative volume again, but it's still early days. New initiatives like insurance platform, spot exchange and INX are promising, but there is no revenue visibility from them in the near term. The revival of derivatives volume on BSE, smart order routing and interoperability are key triggers to transaction revenue. The value proposed value unlocking of the StAR MF platform is positive and will be closely watched. We arrive at a SoTP-based target price of Rs 565 by assigning 10x multiple to core June-22E PAT (Rs 57/share), Rs 110/sh for the CDSL stake and adding net cash excluding SGF and clearing cash (Rs 397/sh). BSE has net cash of Rs 18bn (~78% of market cap) and a dividend yield of ~5%, which limits downside. Maintain ADD. Vinati Organics: Our SELL recommendation on Vinati Organics with a discounted cash flow based target price of INR 820 (WACC 10%,...

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...