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Vinati Organics
BUY
INDUSTRY CHEMICALS Value creation continues
CMP (as on 15 May 2017) Rs 845 Vinati Organics (VOL) reported strong growth in (5) A healthy B/S (net cash). Maintain BUY with an
revenues at Rs 2.0bn (+26% YoY) in 4QFY17, mainly increased TP of Rs 960 (25x FY19E EPS).
Target Price Rs 960 led by a substantial contribution from products
launched in FY17 (~15% of revenues). EBITDA stood Highlights of the quarter
Nifty 9,445
Sensex 30,322 at Rs 605mn (+19% YoY), and EBITDA margin remains Volume details: Products launched in FY17 contributed
KEY STOCK DATA healthy at 31%. Growth in APAT was muted at 3% to ~15% to the revenues. IB and IBB registered strong
Bloomberg VO IN Rs 406mn, owing to a higher tax rate (33% vs 16%). growth in Q4.
No. of Shares (mn) 52 VOLs story remains intact. Revenues from ATBS New product launches: The company launched two
MCap (Rs bn) / ($ mn) 44/680 (42% contribution in FY17) will stay strong, driven by high-margin products in 1QFY17. TB Amines was
6m avg traded value (Rs mn) 31 water treatment and construction chemicals. The launched in 3QFY17. PTBT/PTBBA will start
STOCK PERFORMANCE (%) launch of new products (preferably with higher contributing to revenues from FY18. VOL is undertaking
52 Week high / low Rs 894/456 margins) in FY17 will drive growth till FY19. The two large capex, which are (1) Butyl phenol: ~Rs 2bn
3M 6M 12M commissioning of the proposed ~Rs 7bn projects for capex, >1.5x ATR, commissioning FY19 end, and (2)
Absolute (%) 16.4 56.7 77.6 Butyl phenol and Para amino phenol will start from Para amino phenol: Rs 5bn capex, 1.2x ATR, timeline
Relative (%) 8.7 41.4 58.6
FY19, and will provide another phase of growth. not disclosed yet.
SHAREHOLDING PATTERN (%) VOL remains one of our preferred picks, based on (1) Near-term outlook: The stock has risen ~55% in the
Promoters 73.97 Confidence in its new product launches, (2) Traction last six months, led by the launch of new products and
FIs & Local MFs 6.87 in ATBS demand, (3) High pricing power, given VOLs clarity on future launches. VOL is a multi-year growth
FPIs 1.95 niche position and product selection, (4) Strong story. Every weakness in the stocks price should be
Public & Others 17.21 margins and return ratios (RoE/RoIC of 20%+), and considered as a buying opportunity.
Source : BSE Financial Summary
(Rs mn) 4QFY17 4QFY16 YoY (%) 3QFY17 QoQ (%) FY16 FY17P FY18E FY19E
Net Sales 1,950 1,544 26.3 1,644 18.6 5,995 6,663 8,293 9,274
Satish Mishra
EBITDA 605 507 19.3 531 14.1 1,754 2,192 2,759 3,180
satish.mishra@hdfcsec.com
APAT 406 393 3.3 326 24.7 1,002 1,393 1,734 1,981
+91-22-6171-7334
Diluted EPS (Rs) 7.9 7.6 3.3 6.3 24.7 19.4 27.0 33.6 38.4
P/E (x) 43.5 31.3 25.1 22.0
Deepak Kolhe EV / EBITDA (x) 24.7 19.7 15.7 13.5
deepak.kolhe@hdfcsec.com RoE (%) 20.5 22.9 23.1 21.7
+91-22-6171-7316 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
VINATI ORGANICS : RESULTS REVIEW 4QFY17
Margin Analysis
4QFY17 4QFY16 YoY (bps) 3QFY17 QoQ (bps)
Tax rate was lower in Raw Material Expenses % Net Sales 48.1 44.7 340 45.6 258
4QFY16, owing to deferred Employee Expenses % Net Sales 5.3 6.0 (70) 7.9 (258)
tax and earlier years Other Expenses % Net Sales 15.5 16.3 (88) 14.2 123
adjustment EBITDA Margin (%) 31.1 32.9 (181) 32.3 (123)
Tax Rate (%) 33.4 16.1 1,723 33.1 31
APAT Margin (%) 20.8 25.4 (462) 19.8 101
Source: Company, HDFC sec Inst Research
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
Key Assumptions
YE Mar (Rs mn) FY13 FY14 FY15 FY16 FY17P FY18E FY19E
IBB
Sales (Rs mn) 2,047 2,426 2,322 1,782 1,743 1,876 1,923
Capacity Utilisation (%) 84 87 89 92 94 97 99
IBB is a mature product YoY % 33.1 18.5 (4.3) (23.3) (2.2) 7.6 2.5
% of Sales 37.8 35.3 30.6 30.8 26.7 23.1 21.1
IB
Sales (Rs mn) 560 867 887 508 480 504 530
Capacity Utilisation (%) 70 80 100 96 89 98 101
YoY % 61.7 54.8 2.3 (42.7) (5.5) 5.1 5.1
% of Sales 10.3 12.6 11.7 8.8 7.3 6.2 5.8
Total Sales (Rs mn) 5,417 6,873 7,590 5,782 6,533 8,131 9,092
YoY % 21.1 26.9 10.4 (23.8) 13.0 24.5 11.8
Source: Company, HDFC sec Inst Research
Change In Estimates
FY18E FY19E
Particulars (Rs mn)
Old New % Change Old New % Change
Revenues 7,924 8,293 4.7 8,811 9,274 5.3
There is increase in EBITDA 2,861 2,759 (3.5) 3,239 3,180 (1.8)
revenues assuming higher APAT 1,750 1,734 (0.9) 1,989 1,981 (0.4)
crude prices. However, AEPS (Rs.) 33.9 33.6 (0.9) 38.6 38.4 (0.4)
there are no major change Source: HDFC sec Inst Research
earnings
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
Peer Valuation
Mcap CMP TP* EPS (Rs/sh) P/E (x) P/BV (x) ROE (%)
Rating*
(Rs bn) (Rs/sh) (Rs/sh) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
AGROCHEMICALS
UPL 424.5 837 NEU 780 35.6 40.0 48.8 23.5 20.9 17.2 5.7 4.7 3.9 27.2 24.8 24.9
PI Industries 113.8 830 BUY 951 31.6 32.1 37.9 26.3 25.8 21.9 7.5 6.0 4.9 32.1 25.8 24.7
Rallis India 47.9 247 BUY 280 9.6 11.0 14.0 25.7 22.3 17.6 4.3 3.8 3.4 18.7 18.2 20.3
Dhanuka Agritech 44.2 900 BUY 881 25.3 31.9 40.1 35.6 28.2 22.5 9.1 7.4 6.1 25.7 29.0 29.8
Insecticides India 14.1 681 BUY 670 26.5 33.2 41.9 25.7 20.5 16.2 3.1 2.7 2.3 12.6 14.0 15.4
FERTILISERS
Coromandel Int 116.5 399 BUY 385 16.4 20.6 25.7 24.4 19.4 15.5 4.0 3.6 3.1 17.3 19.5 21.4
Chambal Fertilisers 54.1 130 BUY 100 9.7 9.8 10.0 13.4 13.2 13.0 2.0 1.8 1.6 15.9 14.4 13.2
CHEMICALS
SRF Ltd 103.7 1,806 NEU 1,663 85.0 93.8 110.9 21.2 19.2 16.3 3.4 3.0 2.6 17.1 16.5 17.1
Vinati Organics 43.6 845 BUY 960 27.0 33.6 38.4 31.3 25.1 22.0 6.4 5.3 4.4 22.9 23.1 21.7
Navin Fluorine 29.2 2,978 NEU 3,300 113.4 137.8 165.0 26.3 21.6 18.0 3.8 3.4 3.0 15.8 16.6 17.5
Source: Company, HDFC sec Inst Research, *As per previous published report
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
RECOMMENDATION HISTORY
Vinati Organics TP Date CMP Reco Target
1,050 27-Jun-16 512 BUY 656
950 7-Oct-16 616 BUY 734
850
750
1-Nov-16 591 BUY 735
650 6-Feb-17 755 BUY 820
550 13-Apr-17 740 BUY 848
450 15-May-17 845 BUY 960
350
250 Rating Definitions
BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Aug-16
Apr-17
Jan-17
Jul-16
Sep-16
Feb-17
Nov-16
Jun-16
May-16
May-17
Dec-16
Mar-17
Oct-16
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
Disclosure:
We, Satish Mishra, PGDM & Deepak Kolhe, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject
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beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities
Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
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VINATI ORGANICS : RESULTS REVIEW 4QFY17
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Board : +91-22-6171 7330 www.hdfcsec.com
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