Target: ₹1,844

CMP: ₹1,583.10

Vinati Organics enjoys global leadership in two specialty chemicals, with a market share of 70 per cent in IBB (isobutyl benzene) and 80 per cent in ATBS (2-Acrylamindo 2-Methylpropane Sulfonic Acid).

In 9MFY24, revenue dipped by 15 per cent y-o-y, due to ATBS destocking and fall in realisation. EBITDA margins fell by 354bps YoY to 24.5 per cent on account of a weak sales mix. Consequently, net profit declined by 32 per cent y-o-y.

Destocking in ATBs has largely eased, and growth is expected to pick up in FY25. Further, contributions from new products, such as IB derivatives and antioxidants, will support revenue growth.

We reduce our EPS estimates by 48 per cent and 41 per cent for FY24 and FY25, respectively, to account for earning miss in 9M-FY24.

However, we maintain positive on VOL in the long term given strong market share in ATBs, ramp-up in new products, strong cash flows, a healthy balance sheet, and return ratios. We value Vinati Organics at a P/E of 34x as we roll forward on FY26E, however, given revision in earning estimates, we downgrade Vinati Organics to Accumulate, with a revised target price of ₹1,844.