Accumulate Vinati Organics; target of Rs 1781: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Vinati Organics with a target price of Rs 1781 in its research report dated May 18, 2024.

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May 20, 2024 / 16:50 IST

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Prabhudas Lilladher's research report on Vinati Organics

Vinita Organics (VO IN) reported a topline of Rs 5.5bn, marking a 23% QoQ growth driven by increased volumes, particularly in ATBS, which contributes 32% to the company’s revenue. With destocking now taking a back seat, volumes are expected to rise in FY25. Additionally, the company commenced production of MEHQ and Guaiacol in March 2024, which will begin contributing to revenue in the second half of FY25. Despite facing threats from China in the antioxidant segment, strong domestic demand is expected to double its revenue to Rs 2.5-2.8bn in FY25. The ATBS expansion, phenol plant and the launch of several additional antioxidants are on track and expected in H2FY25. We believe the company’s performance will improve from here on due to: 1) Oil and gas companies focusing more on Enhanced Oil Recovery (EOR) rather than drilling in new fields, leading to increased ATBS demand; and 2) increasing contribution of new products to revenue 3) Butyl Phenol leading to its full capacity utilization.

Outlook

The stock currently trades at ~44x FY25 P/E with return ratios > 15%. We upgrade the stock to ‘Accumulate’ rating with revised TP of Rs 1,781 valuing at 40x P/E on FY26E EPS of ~Rs 44.

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