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Prabhudas Lilladher Report
Vinita Organics Ltd. reported a topline of Rs 5.5 billion, marking a 23% QoQ growth driven by increased volumes, particularly in ATBS, which contributes 32% to the company's revenue. With destocking now taking a back seat, volumes are expected to rise in FY25.
Additionally, the company commenced production of MEHQ and Guaiacol in March 2024, which will begin contributing to revenue in the second half of FY25.
Despite facing threats from China in the antioxidant segment, strong domestic demand is expected to double its revenue to Rs 2.5-2.8 billion in FY25.
The ATBS expansion, phenol plant and the launch of several additional antioxidants are on track and expected in H2 FY25.
We believe Vinita Organics' performance will improve from here on due to:
Oil and gas companies focusing more on Enhanced Oil Recovery rather than drilling in new fields, leading to increased ATBS demand; and
increasing contribution of new products to revenue,
Butyl Phenol leading to its full capacity utilization.
The stock currently trades at ~44 times FY25 price/earnings with return ratios more than 15%. We upgrade the stock to ‘Accumulate' rating with revised target price of Rs 1,781 valuing at 40 times P/E on FY26E earnings per share of ~Rs 44.
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