Buy Vinati Organics, target price Rs 2,500: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on Vinati Organics with a target price of Rs 2500. The current market price of Vinati Organics is Rs 1930. Vinati Organics., incorporated in 1989, is a midcap company with a market cap of Rs 20000.21 crore) operating in chemicals sector.

Vinati Organics' key products/revenue segments include Organic/Inorganic Heavy Chemicals, Export Incentives and Scrap for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-06-2024, the company has reported a consolidated total income of Rs 533.98 crore, down -4.64% from last quarter total income of Rs 559.94 Crore and up 19.63 % from last year same quarter Total Income of Rs 446.36 crore. The company has reported net profit after tax of Rs 84.16 crore in the latest quarter.

Investment Rationale
Motilal Oswal Financial Services continues to believe that Vinati Organics' overall long-term growth outlook is healthy. The stock is trading at ~39x FY26E EPS of Rs 54 and ~28x FY26E EV/EBITDA. It had a fixed asset turnover of 1.5x as of FY24. We value the company at 45x Sep-26E EPS to arrive at a target price of Rs 2,500. They have reiterated the BUY rating on the stock.

Vinati Organics holds a 65% global market share in ATBS and IBB, primarily serving export markets. To meet the growing demand, the company is expanding its ATBS capacity, which is expected to come online in 2HFY25. Despite a temporary sales slowdown due to global destocking, Vinati Organics expects long-term growth in ATBS usage for water treatment, oil recovery, and adhesives. This capex is expected to solidify the company's leadership in the specialty monomer segment.

Promoter/FII Holdings
Promoters held 74.28 per cent stake in the company as of 30-Sep-2024, while FIIs owned 5.47 per cent, DIIs 7.27 per cent.