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Vinati Organics Stock May Plummet 42%: Analysts Cite Disappointing Q1 Results and Intensifying Competition

2024-08-20 · GeoSquare

Shares of Vinati Organics are likely to witness a sharp decline of over 40%, according to several brokerage firms. The specialty chemical player's Q1 results failed to impress, and the company's capex plans have been pushed back amidst intensifying competition.

Vinati Organics reported a net profit of Rs 86 crore in Q1, up 11.68% year-on-year (YoY). The company's revenue from operations grew 17.1% to Rs 524.71 crore during the quarter, while its Ebitda came in at Rs 125 crore, up 24% YoY.

However, the management's outlook for the year remains weak, with the company eyeing only 50% utilization in FY25. Meaningful revenue from new projects is expected only from FY26. The company's Ebitda has grown at a CAGR of 2% over the last 5 years, which is a cause for concern.

Nirmal Bang Institutional Equities has given a 'sell' rating to the stock with a target price of Rs 1,520. The brokerage firm cited the company's disappointing Q1 results and the pushback in capex plans as reasons for the downgrade.

Kotak Institutional Equities has also given a 'sell' tag to the stock with a fair value of Rs 1,160. The brokerage firm cut its FY2025E EPS estimate by 4% following the soft Q1 results and the postponement of revenues from new projects.

Shares of Vinati Organics traded in a tight range on Tuesday around Rs 2,005-2,020. The total market capitalization of the company stood near Rs 21,000 crore. The stock has dropped nearly 15% from its 52-week high at Rs 2,331.05, hit earlier this month.

On the other hand, Prabhudas Lilladher has given an 'accumulate' tag to the stock with a target price of Rs 2,337. The brokerage firm cited the company's key projects, including the ATBS expansion and the launch of additional antioxidants, as reasons for the upgrade.

Vinati Organics is a leading specialty chemical company in India, with a focus on the production of ATBS, Butyl Phenols, and antioxidants. The company has a strong presence in the domestic market and is expanding its product portfolio to cater to the growing demand for specialty chemicals.

Key projects, including the ATBS expansion, phenol plant, and launch of additional antioxidants, are on track and anticipated to come online in H2FY25. The company's performance is expected to improve as the ATBS expansion aligns with the growing demand, particularly as oil and gas companies increasingly focus on enhanced oil recovery.