Cholamandalam securities is bullish on Vinati Organics has recommended buy rating on the stock with a target price of Rs 1877 in its research report dated January 31, 2019.
Cholamandalam securities' research report on Vinati Organics
In 3QFY19, VOL’s revenue grew a robust 63% YoY to INR 3bn led by recovery in IBB volumes and export volumes of ATBS, aided with solid domestic market sales. Closure of their competitor, Lubrizol’s ATBS plant resulted in firm demand. Increased revenues can also be attributed to higher ATBS realizations. • The significant increase in IBB volumes was due to one of its largest customers resuming production after a prolonged shutdown. Going ahead, the management expects 30% YoY growth in ATBS and IBB volumes and a overall volume growth of 30%-35% with the commissioning of Butyl Phenol plant.
We expect the margins to sustain over the coming years, given its commanding market share and proprietary technology to manufacture ATBS, which yields high margins and increasing demand from oil & gas, shale recovery and water treatment. Also the company is in an advantageous position due to Lubrizol’s exit. At CMP, the stock is trading at 20x FY21E EPS. We value the stock at 24x FY21E EPS to arrive at a Target Price of INR 1,877 and hence rate the stock a BUY.
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