Vinati Organics Ltd. share price target

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...

We are valuing Vinati Organics 25xSept'20 EPS with a revised target price of Rs 1,700. We upgrade our rating to Buy. Vinati Organics (VO) reported a strong set of numbers with Sales/EBITDA/PAT coming in at Rs 2.53bn/Rs 9.5bn/Rs 650mn growing at 57.3/107.3/123.1% respectively. VO reported the highest ever quarterly EBITDA margin of 37.7% (expansion of 9.0 percentage points YoY).

Vinati Organics Ltd (VOL) registered strong growth in both sales (up 44% y-o-y) and net profitability (up 107% y-o-y) largely due to incremental volumes in ATBS

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 43.9% YoY & 107% YoY led by strong traction in ATBS and customised products. EBITDA margins improved by 740bps YoY to 34.7% due to better product mix and benefits of scale. Led by robust demand for IBB & ATBS in FY19E and pick-up in customised products, we expect current growth momentum to continue....

Due to the persistent rally in the stock (up 20%) post results, we downgrade to Neutral from Buy, with no change in P/E multiple and a revised TP of Rs 1,170. Vinati Organics (VO) is off to a spectacular start in FY19, VO has reported Sales/EBITDA/PAT growth of 43.6/82.8/106.6% YoY to Rs 2.64/0.92/0.64bn. PAT, adjusting for forex gain of Rs 90mn in the other income is at Rs 583 mn.

The demand for ATBS is very strong. As crude/oil price increases the demand for ATBS alslo increases, which gives pricing power to the company. For, FY19 demand in 2-Acrylamido 2 Methylpropane Sulfonic Acid (ATBS) would lead to sales...

We value VO at 25x Jun-20 EPS and resume coverage with a TP of Rs 1,185. Vinati Organics (VO IN) is a diversified chemicals manufacturer with an impeccable product selection history, superior return ratios (FY18 RoE/RoIC: 19.5/25.6%), strong environmental practices and a robust earnings trajectory. VO is a leader in its key products like 2-Acrylamido-2-Methylpropane Sulfonic Acid (ATBS-45% global share), Iso Butyl Benzene (IBB-65% global share) & Iso Butylene(IB-70% domestic share) with technology tie-ups with leading national institutes.