Chemical stock trading near all-time high. Gets 'buy' tag from Motilal Oswal

Chemical company's revenue increased by 69% YoY to ₹16.2b, aided by a strong growth in volume as well as price hikes taken in FY22 due to an increase in input costs. (MINT) — Chemical company's revenue increased by 69% YoY to ₹16.2b, aided by a strong growth in volume as well as price hikes taken in FY22 due to an increase in input costs. **(MINT)**

2 min read . Updated: 02 Sep 2022, 02:23 PM IST Livemint

Chemical stock may go up to ₹2.593 apiece levels breaching its current 52-week high of ₹2,323.80 per share on NSE, believes Motilal Oswal

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Stock to buy today: After getting close to 52-week low on 22nd June 2022, Vinati Organics share price has been in uptrend and it has come close to its 52-week high of ₹2,323.80 apiece on NSE. Motilal Oswal believes that uptrend in the chemical stock may continue and the stock may go up to ₹2,593 apiece levels. Vinati Organics share price today is ₹2,236 apiece that means the brokerage is expecting around 16 per cent upside in this scrip. The scrip has recommended positional investors to 'buy' the scrip for ₹2,593 target.

Highlighting the increase in revenue and profitability of the company, Motilal Oswal research report said, "Company's evenue increased by 69% YoY to ₹16.2b, aided by a strong growth in volume as well as price hikes taken in FY22 due to an increase in input costs."

The brokerage went on to add that COVID-led disruptions resulted in higher operating costs due to higher freight costs on account of the shortage of containers and higher power and fuel costs. Consequently, EBITDA margin posted a contraction of ~10pp. VO’s PAT grew 15 per cent YoY to ₹2.3b.

"The company is in the process of amalgamating VAL with VO, which is expected to be completed by FY23-end, well in line with its growth strategy. This will result in the forward integration of Butyl Phenol to anti-oxidants (AOs), creating synergies and generating incremental revenue of INR3b by FY24E," brokerage said adding, "This will enable better synergies, making VO the largest and only backward and forward integrated manufacturer of AOs in India. AO demand in India and globally stands at 12,000 TPA and 3 lakh TPA, respectively."

On valuations of the company, the brokerage report said, "The demand outlook for the ATBS segment remains positive going forward after a temporary blip in FY22. Veeral Organics Pvt. (a wholly-owned subsidiary of VO) is set to commence production of MEHQ, Guaiacol, and Iso Amylene in 1HFY24, which should drive the next level of growth in VO."

On its suggestion to positional investors in regard to Vinati Organics shares, Motilal Oswal said, "The stock is trading at 38x FY24E EPS and 30x FY24E EV/EBITDA, with return ratios of 20-24 per cent. It has a fixed asset turnover of 2x as of FY22, which is likely to improve to 2.1x by FY24E. We value the company at 45x FY24E EPS to arrive at our TP of ₹2,593. We maintain our Buy rating."

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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