Buy Vinati Organics; target of Rs 100: Nirmal Bang

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Buy Vinati Organics; target of Rs 100: Nirmal Bang

Nirmal Bang is bullish on Vinati Organics and has recommended buy rating on the stock with a target of Rs 100 in its January 27, 2011 research report.

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Nirmal Bang is bullish on Vinati Organics and has recommended buy rating on the stock with a target of Rs 100 in its January 27, 2011 research report.

"Vinati Organics Limited (VOL) reported sales of Rs 86 crore, as compared to Rs 58 crore in Q3FY10, registering an impressive growth of 49.1% yoy. ATBS was the major growth driver. We expect the demand to remain strong for future also. The company has started getting the benefit of backward integration exercise, which it took last quarter. EBITDA margins improved qoq/yoy by 190bps/100bps to 23%. We expect the company would be able to maintain these margins and see some improvement in the coming quarter."

"VOL is witnessing robust growth in ATBS. It has managed to sell 3000 Mt during the quarter as against 1500 MT in Q3FY10 and 2700 in Q2FY11 and expected to sell around 10000 MT ATBS for FY11 whole. The company has signed an agreement with IFC to raise USD 16 million funds to fund its Rs 100 crore capex. Out of this USD 11 million is ECB and USD 5mnis FCCB convertible at the rate of Rs 100 within five years of issue. All the additional and new facilities like ATBs, DAAM. TBA is expected to be operational by Oct 2011. Marginal benefit of which would be visible in second half of FY12 but full benefit would come only in FY13. The company is awaiting the Govt's approval for its power-gen facility, which is expected to come by June'11. It would take another 18 months after the approval for commissioning of the plant. Management has given the guidance of achieving Rs 500 cr revenues in FY13 and Rs 1000 crore revenues in FY15 based on the robust growth of ATBs and introduction of new products."

"At the current price of Rs 76, VOL is trading at a PE of 8.3x FY11 & 6.1x FY12 earnings. We had recommended the stock at Rs 70 on 17th June 2010. Based on our estimated EPS of Rs 12.5 for FY12E and a target PE multiple of 8x we arrive at a target price of Rs 100 per share, potential upside of 31%. Consequently, we reiterate our BUY rating on the stock with a long-term view," says Nirmal Bang research report.

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