Vinati Organics extends rally into fifth straight day, soars 36% in 1 week

The company expects some pressure on the oil-related application during FY21, but demand for pharma, water treatment and others is expected to continue growing

Shares of Vinati Organics continue their northward movement, trading higher for the fifth straight day and up 5 per cent at Rs 1,355 on the BSE on Friday. The stock of the commodity chemicals maker was trading at its record high level. In the past one week, it has outperformed the market by surging 36 per cent, as against 0.44 per cent rise in the S&P BSE Sensex.

For April-June quarter (Q1FY21), 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. Its revenue from operations stood at Rs 232 crore during the quarter under review, down from Rs 245 crore in Q1FY20.

Despite sluggish demand for 2-Acrylamido 2-Methylapropane Sulphonic Acid (ATBS) in the quarter, EBITDA (earnings before interest, taxes, depreciation, and amortization) margin expanded to 42.0 per cent from 41.3 per cent in Q1FY20, driven by a customised order.

The Company's products find application across various sectors such as pharmaceutical, water treatment, oil and gas, agrochemicals and personal care. For FY21, there is some pressure on the oil related application but demand for pharma, water treatment and others is expected to continue growing.

The introduction of Butyl Phenols which are used in frangrance and anti-oxidants will also contribute meaningfully to the overall sales and help the Company to tide through the global slowdown caused by the Covid-19 pandemic, the company said in 2019-20 annual report.

Anand Rathi Stock Brokers, have 'buy' rating on the stock 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. The stock however, has surpassed the brokerage firm's target price of Rs 1,350 per share.

Meanwhile, analysts at HDFC Institutional Equities have 'sell' rating on the stock with a target price of Rs 820 per share. The brokerage firm expects demand slowdown for the high margin ATBS that contributed 60 per cent to its revenue mix in FY20, shift in revenue mix towards lower margin Iso Butyl Benzene (IBB), which formed 32 per cent of the mix in 1Q versus 16 per cent in FY20, slow ramp-up in the recently-commissioned Butyl Phenol product line.

At 11:15 am, the stock was trading 5 per cent higher at Rs 1,352 on the BSE, as against a marginal 0.04 per cent rise in the S&P BSE Sensex. A combined around 320,000 equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.