Sell Vinati Organics, target price Rs 1765: HDFC Securities

HDFC Securities has sell call on Vinati Organics with a target price of Rs 1765. The current market price of Vinati Organics is Rs 2225.2. Time period given by analyst is one year when Vinati Organics Ltd. price can reach defined target.

Vinati Organics Ltd., incorporated in the year 1989, is a Mid Cap company (having a market cap of Rs 22871.06 Crore) operating in Chemicals sector.

Vinati Organics Ltd. key Products/Revenue Segments include Organic/Inorganic Heavy Chemicals, Export Incentives and Scrap for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 525.01 Crore, up 4.75 % from last quarter Total Income of Rs 501.22 Crore and up 29.97 % from last year same quarter Total Income of Rs 403.95 Crore. Company reported net profit after tax of Rs 101.19 Crore in latest quarter.

Investment Rationale
The SELL recommendation on Vinati Organics with a discounted cash flow-based target price of INR 1,765 (WACC 11%, terminal growth 5%) is driven by a shift in the revenue mix towards lower-margin iso butyl benzene (IBB), butyl phenol, and other products as compared to ATBS, which has a higher margin. It believes the current valuation is contextually high at ~36x FY24E EPS. Q1 EBITDA/APAT were 12/6% below our estimates, owing to a 5% fall in revenue, higher-than-anticipated raw material cost, offset by higher-than-expected other income.

Promoter/FII Holdings
Promoters held 74.06 per cent stake in the company as of 30-Jun-2022, while FIIs owned 4.66 per cent, DIIs 8.12 per cent.