Sharekhan is bullish on Vinati Organics has recommended buy rating on the stock with a target price of Rs 2500 in its research report dated August 08, 2022.
Broker Research
August 09, 2022 / 11:04 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.
Sharekhan's research report on Vinati Organics
Q1FY23 revenue/operating profit of Rs. 506 crore/Rs. 131 crore; up 31%/29% y-o-y reflects strong pricing environment for ATBS/IBB and ramp-up of butyl phenol capacities. PAT at Rs. 101 crore, rose 25% y-o-y and was 3% above estimate on higher revenues and other income, but this was partially offset by lower margins. OPM of 25.8% (down 270 bps q-o-q) was 32 bps below our estimate due to elevated energy cost and weaker revenue mix due to ramp-up of low-margin butyl phenol and a recovery in IBB segment. Overall, ATBS demand/margin remains robust and the plant is operating at 100% utilisation. Management has guided for 25% revenue growth and EBITDA margin of 28-30% in FY23 and has been guiding to almost double revenues to Rs. 3,000 crore by FY25 led by a ramp-up of new products (Butyl Phenol, anti-oxidants and five specialty intermediates). The company plans to expand ATBS/butyl phenol capacity by 50%/42% to 60 kt/50 kt at a capex of Rs. 300 crore/Rs. 100 crore.
Outlook
We maintain a Buy on Vinati Organics with a revised PT of Rs. 2,500 given our expectations of strong 39% PAT CAGR over FY22-24E, dominant market share in ATBS/IBB, entry into newer products and improvement in RoE/RoCE to 27%/34 .
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Buy Vinati Organics; target of Rs 2500: Sharekhan - Moneycontrol
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