Motilal Oswal's research report on Vinati Organics
Oil drilling activities remain vigorous globally as the countries move away from their dependence on Russian oil and gas. Average global rig counts have risen 10% since the Russia-Ukraine conflict started in Mar’22. In line with the above, Vinati Organics (VO)’s management outlook for ATBS remains robust and it has announced a 50% capacity expansion to 60ktpa (from 40ktpa), which is likely to come online in 2HFY24. ATBS primarily caters to the oil and gas industry. Exports form a major part of VO’s overall revenue and according to our database, volumes remain steady YoY. Implied blended realizations in USD/kg have also been firm and move in line with the Brent prices over a longer period of time, according to our research.
Outlook
We expect RoE to improve to 26% for FY24 from 21% in FY22. The stock is trading at 32x FY24E EPS and 25x FY24E EV/EBITDA. We reiterate BUY on the stock, and value it at 35x Dec’24 EPS to arrive at our TP of INR2,740.
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