Buy Vinati Organics; target of Rs 110: Sushil Finance

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Buy Vinati Organics; target of Rs 110: Sushil Finance

Sushil Finance is bullish on Vinati Organics (VOL) and has recommended buy rating on the stock with a target of Rs 110 in its May 25, 2011 research report.

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Sushil Finance is bullish on Vinati Organics (VOL) and has recommended buy rating on the stock with a target of Rs 110 in its May 25, 2011 research report.

"Vinati Organics (VOL) is engaged in manufacturing specialty organic chemicals. The company is the world's largest manufacturer of Isobutyl Benzene (IBB) and second largest manufacturer of 2- Acrylamido 2-Methylpropane Sulfonic Acid (ATBS). Other high value products include Normal Butylbenzene (NBB), Hexenes, N-Tertiary Butyl Acrylamide (TBA) and Aromatic Solvents. Vinati Organics Ltd (VOL) posted decent set of numbers for quarter and year ended March 31, 2011. The Topline growth for the year was in line with our estimates however the Bottomline growth exceeded our expectations. We attended the conference call held by the Management of the Company to discuss Q4FY11 financial performance and outlook."

"During Q4FY11, the Net Sales grew by 40.9% y-o-y to Rs 878.3 mn as against Rs 623.4 mn in Q4FY10. The growth was due to the increased contribution from the ATBS segment. The EBIDTA for the quarter grew by 45.0% y-o-y to Rs 221.2 mn while the EBIDTA margin improved by 70 bps to 25.2% against 24.5% in Q4FY10. The higher margin ATBS segment improved the EBIDTA margins for the quarter. The Interest cost increased by 63.6% y-o-y to Rs 11.1 mn and the Depreciation costs increased by 15.2% y-o-y to Rs 14.6 mn. The PAT (adjusted for exceptional items) for the quarter was Rs 166.6 mn against Rs 108.8 mn in Q4FY10. The PAT margins improved by 150 bps y-o-y to 19.0% as against 17.5% during Q4 FY10. Adjusted EPS for Q4FY11 stood at Rs 3.4 as against Rs 2.4 achieved during Q4FY10. During FY11, the Net Sales grew by 36.5% y-o-y to Rs 3,168.9 mn. The EBIDTA increased by 24.8% y-o-y to Rs 714.9 mn. The EBIDTA margin declined by 210 bps y-o-y to 22.6%. The Interest cost was up by 14.9% y-o-y to Rs 38.6 mn and the Depreciation costs increased by 30.3% y-o-y to Rs 64.3 mn. The PAT (adjusted for exceptional items) for the full year increased 36.0% y-o-y to Rs 506.7 mn. The PAT margin for the full year was at 16.0%. Adjusted EPS for FY11 stood at Rs 10.5 as against Rs 8.1 achieved during FY10."

"During FY11, VOL's performance was inline with our estimates on topline front but better than expected on bottomline front as the company availed MAT credit during FY11 which led to lower tax outgo. During FY12 and FY13, VOL would not be availing any MAT credit and would be paying full tax. Going forward, we expect FY12E and FY13E Revenues to grow by 19.7% and 35.4% respectively driven my higher ATBS capacity and higher contribution from newer products. APAT growth for FY12E is expected to be flat due to higher tax outgo whereas FY13E APAT is expected to grow by 43.0% owing to higher ATBS capacity and favorable sales mix towards high margin segments. At the current market price of Rs 74, VOL is available at 4.9x its FY13E EPS of Rs15.1. It is currently trading at 0.7x its FY13E Sales. We maintain our BUY rating on the stock at current levels for target price of Rs 110 (7.3x FY13E EPS)," says Sushil Finance research report.

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