Vinati Organics : Result & it's Implications

As per company website, Vinati Organics Limited (VOL) was established in 1989, is a specialty chemical company, focusing on manufacturing specialty chemicals and organic intermediaries.

We are analysing the results of Vinati Organics to arrive at a key decision to buy or sell this stock as on the date.

Vinati Organics - Q4 FY20 (Audited –Cons)

CMP: 1,028

Total income from operations 245.3 Cr

301.9 Cr (-18.62%) YoY | 238.4 Cr (2.92%) QoQ

Year ending revenue: 1,029 Cr Vs. 1,128 Cr (-8.71%)

Net Profit of 74.6 Cr

82.5 Cr (-9.77%) YoY 66.8 Cr (12.13%) QoQ

Year ending Net profit: 334 Cr Vs. 282 Cr (18.41%)

EPS (in Rs.) 7.26

8.03 YoY | 6.50 QoQ

Year ending EPS: 32.48 Vs. 27.48

View: Average result and below expectation. YoY revenue and profit both have declined however QoQ revenue slightly increased and profit also increased.

Business Updates & Highlights:

Q4FY20 EBITDA is around INR 101.8 Cr Vs. 125.1 Cr in Q4FY19 Vs. 82.9 Cr therefore declined by 19.7% in YoY and up by 21.8% in YoY. EBITDA margin is 41.2% Vs. 41.4% in Q4FY19 Vs. 34.7% in Q3FY20.

FY20 EBITDA to Rs. 413.8 Vs. 423.2 Cr in FY19 therefore declined by 2.2% in YoY. EBITDA margin of 40.2% Vs. 37.5% in FY19.

Board of Directors of the Company at its meeting held on June 13, 2020, inter alia, has recommended an equity dividend of Re.0.50 per share of face value of Re. 1/- each (50%) for the financial year ended March 31, 2020

Financial

ROE and ROCE is around 31% and 45% respectively and book value per share is around INR 117 and share is currently trading at 8.8x of its book value. Company is currently trading at annualized PE of around 32 which is slightly high as per Industry benchmark. Promoter holding is around 74.05% in the company which is very strong and stable. FIIs and mutual fund hold around 5.1% and 5.4% in the company which is slightly increased in QoQ. Cash and cash equivalent from operating activities as of March 2020 is around INR 416 Cr Vs. 201 Cr as of March 2019. The good thing is company is virtually debt free.

Position: Share strong support price is INR 920. Long term investor may continue with the company.

Share View: Share price high 1,255 (52 week) and now 1,028. Vinati Organics Limited (VOL) is a specialty chemical company, focusing on manufacturing specialty chemicals and organic intermediaries.

Opportunities: World leaders in two of main products, Isobutyl Benzene (IBB) and 2-Acrylamido 2 Methylpropane Sulfonic Acid (ATBS). IBB is presently being used and appreciated by all manufactures of Ibuprofen in the world including the founder manufacturer of Ibuprofen i.e. M/s. Knoll Pharmaceuticals of UK and BASF Corporation of USA.

Risk: Continuously declined in topline and bottom line in YoY and QoQ. Export mainly dependent on China and has higher tariff.

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