Shares of Vinati Organics are likely to be headed for a sharp slide of more than 40 per cent, suggest a couple of brokerage firms, which believe that the specialty chemical player failed to impress with its June 2024 quarter performance and the capex plans have been pushed amid increasing competition.
Vinati Organics Ltd reported a net profit of Rs 86 crore in the June 2024 quarter, rising 11.68 per cent on year-on-year (YoY) basis. The company's revenue from operations grew 17.1 per cent to Rs 524.71 crore during the quarter, while its Ebitda came in at Rs 125 crore, up 24 per cent YoY.
The Management indicated that demand forATBS remains robust and growth momentum in Butyl Phenols (BP) and IB derivatives is likely to continue in FY25. However, FY25 Capex in the company was revised downwards to Rs 170 crore vis-à-vis Rs 500 crore indicated earlier as the new project entire commissioning is pushed to FY26, said Nirmal Bang Institutional Equities.
"AO outlook is still weak and it is eying for 50 per cent utilisation in FY25. Meaningful revenue from MEHQ, Guaiacol and expanded ATBS capacity is expected from FY26. Its Ebitda has grown at a CAGR of 2 per cent over the last 5 years. Also, incremental ROCE could be lower than the legacy portfolio," Nirmal Bang added with a 'sell' rating and a target price of Rs 1,520.
Vinati Organics reported somewhat soft 1QFY25 results, which management attributed to a combination of seasonality, product mix shifts and logistical challenges. While it continues to guide to a 20 per cent revenue CAGR over FY2024-27, competition in ATBS, anisole derivatives and antioxidants remains the key risk, said Kotak Institutional Equities.
"We cut FY2025E EPS by 4 per cent following the soft results of 1QFY25 and in view of likely subdued results in 2QFY25 as well, in addition to the further postponement of revenues from VOPL. Vinati seems to be ignoring risks associated with these projects as well as margin pressures in antioxidants," it said with a 'sell' tag and fair value of Rs 1,160.
Shares of Vinati Organics traded in a tight range during the trading session on Tuesday around Rs 2,005-2,020. The total market capitalization of the company stood near Rs 21,000 crore. The stock has dropped nearly 15 per cent from its 52-week high at Rs 2,331.05, hit earlier this month.
Vinita Organics commenced commercial production of MEHQ and Guaiacol in March 24; these products are expected to start contributing to revenue in the second half of FY25. The company’s antioxidant segment, which is focused on capturing the domestic market, is expected to double its revenue in FY25, said said Prabhudas Lilladher.
Key projects, including the ATBS expansion, phenol plant, and launch of additional antioxidants, are on track and anticipated to come online in H2FY25. We expect the company's performance to improve as the ATBS expansion aligns with the growing demand, particularly as oil and gas companies increasingly focus on enhanced oil recovery, it said with an 'accumulate' tag and a target price of Rs 2,337.
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