Sharekhan's research report on Vinati Organics
Vinati Organics ended FY22 on strong note with a massive beat of 24%/35%/21% in Q4FY22 revenue/operating profit/PAT at Rs. 486 crore/Rs. 139 crore/ Rs. 101 crore, up 32%/50%/22% q-o-q. We believe that robust growth was led by strong volume growth across products, ATBS margin recovery and ramp-up of Butyl Phenol. Improved growth outlook across products - ATBS to benefit given elevated oil prices, IBB to witness robust growth on low base of FY22 and sustained revenue ramp-up for butyl phenol. Margins to recover to 30-31% given operating leverage and a favourable base (FY22 OPM contracted by 1,070 bps y-o-y to 27%). The management had earlier guided to almost double its revenues to Rs. 3,000 crore by FY25 and sustainable margin of ~30% driven by optimum expansion of existing products (like ATBS) and ramp-up of new products (Butyl Phenol, anti-oxidants and five specialty intermediates).
Outlook
We maintain a Buy rating on Vinati Organics with a revised PT of Rs. 2,450 given our expectations of strong 33% PAT CAGR over FY22-24E, dominant market share in ATBS/IBB, entry into newer products and improvement in RoE/RoCE to 25%/32%.
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