Buy Vinati Organics; target of Rs 95: Nirmal Bang

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Buy Vinati Organics; target of Rs 95: Nirmal Bang

Nirmal Bang is bullish on Vinati Organics and has recommended buy rating on the stock with a target of Rs 95 in its May 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 95 in its May 27, 2011 research report.

"Vinati Organics Limited (VOL) reported sales of Rs 91.6cr, as compared to Rs 63.5cr in Q4FY10, registering an impressive growth of 44.4% yoy. ATBS was the major growth driver. We expect the demand for ATBS to remain strong for future also. The company has started getting the benefit of backward integration exercise, which it took during 2HFY11. EBITDA margins have improved qoq/yoy by 110bps/10bps to 24.1%. We expect some more improvement in the coming quarters at operating level. The company surprised us on the PAT margins. We were expecting 14.4% of margins whereas it has reported 16% margins in FY11. The management was confident of maintaining similar level of margins in future also."

"The company is witnessing robust growth in ATBS. It has managed to sell 3000 Mt during the quarter as against 2800 in Q4FY10. For FY11 the company has managed to sell Rs 11,000 MT (in-line with expectations) of ATBS as compared to 6,600 Mt in FY10. For FY12 the company has guided for 15000 MT of sales. The company faced few challenges in its legacy product IBB due to enhanced competition. It sold 16,000 Mt of IBB in FY11 as compared to 12,000 Mt in FY10. We believe going forward the IBB sales would continue to remain under pressure.  Management has stated that they would achieve rs 600 cr by FY13 because of robust demand of ATBS implying a CAGR of 35% over two years. It has also announced to increase the capacities of ATBS from planned 18000 MT (in Dec'11) to 21,000 MT (in FY13). The company has also maintained its Rs 1000 cr revenue guidance for FY15 based on the robust growth of ATBs and introduction of new products."

"At the current price of Rs. 75, VOL is trading at a PE of 6.3x FY12E & 5.3x FY13E earnings. The valuations look attractive at current levels given revenue visibility on back of robust demand outlook and profitability improvement. Based on our estimated EPS of Rs 11.8 for FY12E and a target PE multiple of 8x we arrive at a target price of Rs. 95 per share, potential upside of 26%. Consequently, we reiterate our BUY rating on the stock with a long-term view," says Nirmal Bang research report.   

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