Vinati Organics adds 14%, hits 52-wk high on heavy volume; up 21% in 2 days

Today's volume on the BSE was 109.8 per cent higher than the volume seen on the counter in the past week

Shares of Vinati Organics zoomed 13.6 per cent, supported by heavy volume, to quote at Rs 1,197 on the BSE on Monday. At 12:30 pm, the stock was up 9.62 per cent on the BSE, as against 0.86 per cent rise in the benchmark S&P BSE Sensex. Today'a high was the stock's 52-week high on the National Stock Exchange (NSE). 

With today's intra-day gain, the stock has leaped 21 per cent in two days on the NSE from a level of Rs 992 touched on August 19, 2020.

A combined 1.59 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report. Of this, 0.13 million shares had changed hands on the BSE, which was 109.8 per cent higher than the volume seen on the counter on the BSE in the past week.

For June quarter of FY21, Vinati Organics posted a standalone net profit of Rs 72.29 crore, down 12.21 per cent, from Rs 74.62 crore reported in the year-ago quarter. Sequentially, the profit declined from Rs 82.35 crore reported in Q4FY20.

It's revenue from operations tumbled to Rs 231.57 crore during the quarter udner review, down from Rs 245.33 crore in Q1FY20. Profit before tax (PBT) dropped 23.50 per cent to Rs 95.08 crore in Q1FY21, as against Rs 124.30 crore in Q1 of FY20. Income tax expense for the quarter skid 47.51 per cent YoY to Rs 21.68 crore.

Analysts at HDFC Instituional Equities gave 'sell' rating on the stock with a target price of Rs 820 after the Q1 results. "Our SELL recommendation on Vinati Organics with a discounted cash flow based target price of INR 820 (WACC 10 per cent, terminal growth 3 per cent) is driven by (1) demand slowdown for the high margin 2-Acrylamido 2-Methylapropane Sulphonic Acid (ATBS) that contributed around 60% to its revenue mix in FY20, (2) shift in revenue mix towards lower margin Iso Butyl Benzene (IBB), which formed nearly 32% of the mix in 1Q versus 16 per cent in FY20, (3) slow ramp-up in the recently-commissioned Butyl Phenol product line. In the absence of new product pipeline, we believe current valuations are high at 30.5x Mar-22E EPS. 1Q EBITDA/PAT were 41/125 per cent above estimates owing to better-than-anticipated traction in IBB and lower than the built-in tax rate," it said.

Meanwhile, those at Phillip Capital gave 'neutral' call on the stock in a post-result report with a target price of Rs 1,000. The company's Q1 operating performance was ahead of their expectations due to improved demand in the integrated operation of IBB and benign material prices. The analysts expect the chemical company to sustain the earnings momentum ahead despite of Covid-19 caused challenges led by "expanded capacities (in IBB/ATBS/IB), fresh revenues flowing from Butyl phenol project and reduced material prices". 

"In order to factor the gradual ramp up in Butyl phenol and margin surprise in Q1, we have fine-tuned our estimates but almost retained them. Hence, we continue to value VO at Rs 1000, that discounts FY22 EPS by 23x and FY22 EV/EBITDA by 16x," they said in a report dated August 3.

Anand Rathi Stock Brokers, on the other hand, have 'buy' rating on the stock with a target price of Rs 1,350 on hope that Vinati’s performance would improve with rising demand for products from Mahad and normalisation of demand in ATBS along with a pick-up in utilisation at the butyl phenol plant.