Buy Vinati Organics; target of Rs 1750: Sharekhan
Sharekhan is bullish on Vinati Organics has recommended buy rating on the stock with a target price of Rs 1750 in its research report dated February 18, 2021.
February 19, 2021 / 03:16 PM IST
Sharekhan's research report on Vinati Organics
We expect Vinati Organics earnings cycle to gain momentum with volume ramp-up for ATBS/Butyl Phenol and sharp recovery in EBITDA margin with improvement in revenue mix towards high-margin ATBS segment (from a low of 37% in 9MFY2021 versus 57% in FY2020). Our positive stance on ATBS demand (key input for oil industry) and margin recovery is underpinned by expectations of a 5.5-mbpd increase in oil demand in CY21 (as per IEA) and likely higher ATBS realisation (rising demand and increase in acrylonitrile prices). Overall, we expect a 33% revenue CAGR and 284bps margin expansion over FY21E-FY23E, which would drive strong 32% PAT CAGR over the same period. Vinati Organics’ dominant market share in ATBS/IBB, debt-free status and solid RoE of 24% makes us constructive on the company.
Improving near to medium-term earnings growth visibility and sustained long term high double-digit growth potential warrants higher valuation multiple for Vinati Organics. Hence, we maintain Buy rating with revised PT of Rs. 1,750.
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