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Nirmal Bang Report
Vinati Organics Ltd.'s Q1 FY25 Ebitda came in ~19% below our estimate on account of lower than expected growth and unfavorable mix change. Ebitda margin improved by 88 basis points mainly led by savings in overheads and operating leverage.
Pickup in the legacy portfolio (including ATBS) along with ramp up of upcoming projects in H2 FY25 remain key monitorable. Any delay in project commissioning and/or scale up might defer the growth.
Vinati Organics' Ebitda has grown at a CAGR of 2% over the last five years (cumulative capex Rs 13 billion). While upcoming projects and expansion of the existing portfolio present a promising case for earnings acceleration, demand recovery and competitive intensity in AOs, MEHQ, Anisole, etc. remains the key.
Also, incremental return on capital employed could be lower than the legacy portfolio. Maintain Sell with a revised target price of Rs 1,520 (26 times PE) after rolling forward valuation to June-26E).
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