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    This debt-free specialty chemicals stock is a buy with 23% upside: Sharekhan

    Synopsis

    Also, the company, with an investment worth Rs 280 crore, is foraying into niche products likely to be commissioned by Q2Fy24. “Capacity expansion for existing products and entry into new products bodes well for earnings growth beyond FY24 for Vinati”, noted the brokerage.

    This debt-free specialty chemicals stock is a buy with 23% upside: SharekhaniStock
    Midcap chemicals stock Vinati Organics has been given a ‘buy’ call by domestic brokerage firm Sharekhan with a target price of Rs 2,500. From the current price level, this results in an upside potential of around 23%.

    As the stock has fallen around 14% from its 52-week high price of Rs 2,377, it offers a good entry point to investors given the sustained long-term high double-digit earnings potential, said the brokerage.

    The company’s capex plan with an estimated outlay of Rs 300 crore is seen to drive its future growth.

    Also, the company, with an investment worth Rs 280 crore, is foraying into niche products likely to be commissioned by Q2Fy24. “Capacity expansion for existing products and entry into new products bodes well for earnings growth beyond FY24 for Vinati”, noted the brokerage.

    The merger of Vinati Organics with Veeral Additives PrivateLimited (VAPL), expected to be completed by the FY23 end, will enable the chemicals company to tap the huge antioxidants market and offer an incremental revenue stream of Rs 300 crore and higher margins on antioxidants. Post the merger, Vinati Organics will become the leading producer of antioxidants in the country.

    The chemicals company has a strong, debt-free balance sheet and has been consistently generating free cash flow of Rs 107-170 crore since FY2019 except for FY22. Strong financials would support the company in its capacity expansion plan as well as development of new niche products. Over the FY2022-2025E, the brokerage expects a strong 32% PAT CAGR and a solid RoE/RoCE of 25%/33%. “The stock trades at 31.5x its FY2024E EPS and 26.4x its FY2025E EPS”, noted the brokerage.

    Nonetheless, key risks seen for the company as cited by the brokerage include lowering of the demand owing to the economic slowdown and delay in the completion of expansion products. Higher raw material price and inability to pass on price hikes on time as well as inadequately together with unfavorable forex rates are seen as other threats.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)




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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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