Vinati Organics Ltd. share price target

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....