Vinati Organics gains for sixth straight day; stocks hit new high on Q4 nos

Shares of Vinati Organics were trading higher for the sixth straight day, up 5 per cent at Rs 2,197 on the BSE, also its new high in an otherwise weak market on Friday. The S&P BSE Sensex was down 0.48 per cent at 39,681 points at 02:39 pm.

In the past two weeks, the stock has outperformed the market by surging 21 per cent, after the company reported strong earnings in March quarter (Q4FY19). In comparison, the benchmark index was up 4 per cent during the same period.

Vinati Organics posted 59 per cent year-on-year (YoY) growth in net profit at Rs 82.63 crore in Q4FY19, against Rs 51.93 crore in a year ago quarter. Operations income grew 40 per cent at Rs 297 crore on YoY basis. EBITDA (earnings before interest tax depreciation and amortization) margin improved substantially to 40.4 per cent from 30.6 per cent in previous year quarter.

The boards of directors recommended dividend of 350 per cent or Rs 7 per share for the financial year 2018-2019.

Vinati Organics is the world’s largest manufacturer of Isobutylbenzene (IBB) and manufacturer of 2–Acrylamido 2–Methylpropane Sulfonic Acid (ATBS).

Analysts at HDFC Securities said that strong traction in ATBS will continue owing to robust demand and shortage of global capacity. The company is expanding its ATBS capacity by around 46 per cent to reap the benefit of the situation.

“Besides, the company will add Butylated Phenols to its product basket. This too, will drive volume growth in FY20/21. Vinati Organics has been commanding a premium in valuations due to an impeccable history of product selection, best in class return ratios (ROE and RoIC for FY20/21E will be 27.9/26.5 and 26.1/28.6 per cent),” they said in results review. The stock, however, was trading above the brokerage firm's 12-month target price of Rs 2,034.


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