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Vinati Organics
Accumulate

 Vinati Organics Q4FY20 sales were below our estimates to Rs 2.45bn CMP Rs 992
(D.est: Rs 2.75bn), sales de-grew by 17.3% YoY and were up 2.9% Target / Upside Rs 1,066 / 7%
sequentially.
BSE Sensex 33,479
 The de-growth in sales YoY is largely attributed to de-growth in ATBS
and IBB volumes. Gross margins improved by 442bps YoY and 509bps NSE Nifty 9,881
QoQ on account of benign RM costs. Scrip Details
 EBITDA/PAT degrew by 15.1/9.6% YoY to Rs 1.0bn/Rs 746mn Equity / FV Rs 103mn / Rs 2
respectively. Employee costs were up 21.9% YoY to Rs159 mn, a Market Cap Rs 102bn
higher other income up by 57.8% YoY to Rs 162mn and a lower tax
rate of 31% against 33% in 4 shielded PAT to Rs 746mn. USD 1bn
52-week High/Low Rs 2,393/Rs 651
Vinati Organics has commissioned Butyl Phenols plant and is expected to
derive ~Rs 1.0-2.0bn sales in FY21E. Butyl Phenols, inherently have a lower Avg. Volume (no) 113,285
operating margin than VO’s current blended margin. We have thus NSE Symbol VINATIORGA
factored in EBITDA margins of 37.5/36.2% in FY21/FY22E. We expect ATBS Bloomberg Code VO IN
volume growth to be subdued (assumed 2.0% volume growth) on account
of lower demand in enhanced oil recovery applications and slowdown due Shareholding Pattern Mar'20(%)
to COVID-19 pandemic. We also have noted that the incremental ATBS Promoters 74.1
Result Update

capacity of 14,000 TPA is likely to get commissioned at the end of FY21E or MF/Banks/FIs 6.1
at the beginning of FY22E. We are expecting IBB sales to pick up starting
FIIs 5.1
FY21E as volume off-take to a key customer is approaching normalcy.
Public / Others 14.8
Outlook and Valuation
Vinati Organics has an impeccable product selection history and is a market Valuation (x)
leader in most of the products it manufactures (ATBS: Global market share FY20A FY21E FY22E
- 65%, IBB: Global market share - 65% and IB: Domestic market share -
70%). Vinati Organics has the best in class operational efficiencies which P/E 30.5 29.0 25.1
help them in deriving superior margins (40.2% EBITDAM in FY20) and EV/EBITDA 23.9 21.3 18.2
subsequently return ratios (ROE/RoCE: 28.6/26.8% in FY20). We continue ROE (%) 28.6 25.2 24.7
to remain positive on Vinati Organics earnings trajectory given
RoACE (%) 26.9 24.0 23.7
commissioning of the new ATBS and Butyl Phenols capacity. We have
upgraded our estimates for FY21/22E due to an anticipation of higher sales
volumes from IBB and Butyl Phenols, we have upgraded our EPS by Estimates (Rs mn)
9.3/3.0% to Rs 34.2/39.5 respectively. We continue to be positive on the FY20A FY21E FY22E
stock, however due to prevailing rich valuations we maintain accumulate Revenue 10,289 12,274 14,633
rating with a target price of Rs 1,066/share.
EBITDA 4,139 4,609 5,298
Q4FY20 Result (Rs Mn)
PAT 3,338 3,514 4,058
Particulars Q4FY20 Q4FY19 YoY (%) Q3FY20 QoQ (%)
EPS (Rs.) 32.5 34.2 39.5
Revenue 2,453 2,966 (17.3) 2,385 2.9
Total Expense 1,437 1,768 (18.8) 1,555 (7.6)
EBITDA 1,017 1,198 (15.1) 830 22.5 Analyst: Archit Joshi
Depreciation 97 68 42.4 93 4.5 Tel: +9122 40969726
EBIT 920 1,130 (18.6) 737 24.8 E-mail: architj@dolatcapital.com
Other Income 162 103 57.8 154 5.3
Associate: Tejas Sonawane
Interest 3 2 12.0 3 2.7 Tel: +9122 40969792
EBT 1,079 1,230 (12.3) 889 21.5 E-mail: tejass@dolatcapital.com
Tax 333 405 (17.8) 220 51.1
RPAT 746 825 (9.6) 668 11.7 Associate: Kalyani Somani
APAT 746 825 (9.6) 668 11.7 Tel: +9122 40969751
E-mail: kalyanis@dolatcapital.com
(bps) (bps)
Gross Margin (%) 59.7 55.2 442 54.6 509
EBITDA Margin (%) 41.4 40.4 106 34.8 664
NPM (%) 30.4 27.8 260 28.0 240
Tax Rate (%) 30.8 32.9 (206) 24.8 605
EBIT Margin (%) 37.5 38.1 (60) 30.9 658

June 18, 2020

 Actual vs DART Estimates (Rs mn) – Q4FY20
Particulars Actual Estimated Variance (%) Comments
Revenue 2,453 2,750 (10.8)
EBITDA 1,017 1,035 (1.8) Lower than expected sales
of ATBS
EBITDA Margin(%) 41.4 37.6 380 bps
PAT 746 786 (5.0)
Source: DART, Company

Change in Estimates
FY21E FY22E
Particulars (Rs Mn)
New Previous Change(%) New Previous Change(%) Comments
Revenue 12,274 12,670 (3.1) 14,633 15,341 (4.6) -
EBITDA 4,609 4,221 9.2 5,298 5,166 2.6
EBITDA Margin(%) 37.5 33.3 424 bps 36.2 33.7 253 bps Higher than expected
sales volumes of IBB &
PAT 3,514 3,215 9.3 4,058 3,939 3 Butyl Phenols
EPS(Rs) 34.2 31.3 9.3 39.5 38.3 3
Source: DART, Company

Segmental Revenue (Rs mn)

15,000
13,000
11,000
9,000
7,000
5,000
3,000
1,000
(1,000)
FY21E

FY22E
FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Isobutyl Benzene (IBB) ATBS Isobutylene (IB) Gas Others Butyl Phenols

Source: DART, Company

Segmental Revenue Mix %

100%

80%

60%

40%

20%

0%
FY21E

FY22E
FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Isobutyl Benzene (IBB) ATBS Isobutylene (IB) Gas Others Butyl Phenols
Source: DART, Company

June 18, 2020 2

Assumptions
Iso Butyl Benzene
Particulars FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Installed Capacity (MT) 16,000 16,000 16,000 16,000 16,000 16,000 25,000 25,000 25,000 25,000
Unit sold (MT) 13,493 13,898 14,315 14,744 14,744 14,302 15,500 13,950 15,624 16,405
YoY % 3.0 3.0 3.0 3.0 0.0 (3.0) 8.4 -10.0 12.0 5.0
Utilisation % 84.3 86.9 89.5 92.2 92.2 89.4 62.0 55.8% 62.5% 65.6%
Realisation per unit (Rs
/kg) 152 175 162 121 111 111 129 135 135 135
YoY % 29.2 15.1 (7.1) (25.5) (8.5) 0.1 16.3 5.0 0.0 0.0
Total sales value (Rs In 2,047 2,426 2,322 1,782 1,630 1,582 1,995 1,885 2,112 2,217
mn)
YoY % 33.1 18.5 (4.3) (23.3) (8.5) (3.0) 26.1 -5.5 12.0 5.0
Source: Company, DART

Isobutylene
Particulars FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Installed Capacity (MT) 12,000 12,000 12,000 12,000 15,000 30,000 30,000 30,000 30,000 30,000
Unit sold (MT) 8,400 9,600 12,000 11,525 12,490 14,476 17,186 18,117 28,661 29,961
YoY % 7.7 14.3 25.0 (4.0) 8.4 15.9 18.7 5.4 58.2 4.5
Utilisation % 70.0 80.0 100.0 96.0 83.3 48.3 57.3 60.4 95.5 99.9
Realisation per unit 114.3 154.8 126.7 72.5 74.0 77.9 89.8 89.8 89.8 89.8
(Rs/kg)
YoY % 50.1 35.5 (18.2) (42.7) 2.0 1.0 15.3 0.0 0.0 0.0
Total sale value (Rs mn) 560 867 887 508 544 601 776 815 847 881
YoY % 61.7 54.8 2.3 (42.7) 7.1 10.5 29.1 5.0 4.0 4.0
Source: Company, DART

ATBS
Particulars FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Installed Capacity (MT) 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 40,000
Unit sold (MT) 13,625 14,300 19,475 17,626 19,036 25,033 34,170 33,486 34,156 37,572
YoY % 9.0 5.0 36.2 (9.5) 8.0 31.5 36.5 -2.0 2.0 10.0
Utilisation % 52.4 55.0 74.9 67.8 73.2 96.3 131.4 128.8 131.4 93.9
Realistion per unit 163 197 180 152 150 151 178 174 174 174
(Rs/kg)
YoY % (4.3) 20.7 (8.9) (15.4) (1.0) 0.5 49.0 -2.5 0.0 0.0
Total sales value (Rs mn) 2,226 2,820 3,499 2,678 2,864 3,784 6,095 5,824 5,940 6,534
YoY % 4.3 26.7 24.1 (23.5) 6.9 32.2 61.1 -4.4 2.0 10.0
Source: Company, DART

Butyl Phenol
Butyl Phenols FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E FY22E
Total sale value (Rs mn) 0 0 0 0 0 0 0 0 1,500 3,000
Source: DART, Company

June 18, 2020 3

 Profit and Loss Account
(Rs Mn) FY19A FY20A FY21E FY22E
Revenue 11,081 10,289 12,274 14,633
Total Expense 7,045 6,149 7,665 9,335
COGS 5,251 4,287 5,391 6,735
Employees Cost 542 643 720 777
Other expenses 1,252 1,220 1,554 1,822
EBIDTA 4,036 4,139 4,609 5,298
Depreciation 274 332 400 442
EBIT 3,762 3,808 4,209 4,856
Interest 9 11 5 3
Other Income 500 450 492 570
Exc. / E.O. items 0 0 0 0
EBT 4,252 4,247 4,696 5,423
Tax 1,428 908 1,182 1,365
RPAT 2,825 3,338 3,514 4,058
Minority Interest 0 0 0 0
Profit/Loss share of associates 0 0 0 0
APAT 2,825 3,338 3,514 4,058

Balance Sheet
(Rs Mn) FY19A FY20A FY21E FY22E
Sources of Funds
Equity Capital 103 103 103 103
Minority Interest 0 0 0 0
Reserves & Surplus 10,410 12,691 14,972 17,673
Net Worth 10,513 12,794 15,074 17,776
Total Debt 37 3 3 3
Net Deferred Tax Liability 846 705 705 705
Total Capital Employed 11,395 13,502 15,783 18,484

Applications of Funds
Net Block 4,745 7,508 7,417 7,675
CWIP 1,912 310 700 500
Investments 0 0 0 0
Current Assets, Loans & Advances 5,619 6,612 8,714 11,505
Inventories 924 932 1,159 1,448
Receivables 2,440 2,018 2,779 3,313
Cash and Bank Balances 38 537 1,526 3,347
Loans and Advances 2 26 26 26
Other Current Assets 1,251 826 950 1,097

Less: Current Liabilities & Provisions 880 927 1,049 1,196

Payables 531 557 678 826
Other Current Liabilities 349 371 371 371
sub total
Net Current Assets 4,738 5,685 7,666 10,309
Total Assets 11,395 13,502 15,783 18,484
E – Estimates

June 18, 2020 4

 Important Ratios
Particulars FY19A FY20A FY21E FY22E
(A) Margins (%)
Gross Profit Margin 52.6 58.3 56.1 54.0
EBIDTA Margin 36.4 40.2 37.6 36.2
EBIT Margin 34.0 37.0 34.3 33.2
Tax rate 33.6 21.4 25.2 25.2
Net Profit Margin 25.5 32.4 28.6 27.7
(B) As Percentage of Net Sales (%)
COGS 47.4 41.7 43.9 46.0
Employee 4.9 6.2 5.9 5.3
Other 11.3 11.9 12.7 12.5
(C) Measure of Financial Status
Gross Debt / Equity 0.0 0.0 0.0 0.0
Interest Coverage 398.5 348.6 841.7 1618.7
Inventory days 30 33 34 36
Debtors days 80 72 83 83
Average Cost of Debt 10.0 54.2 144.3 86.6
Payable days 17 20 20 21
Working Capital days 156 202 228 257
FA T/O 2.3 1.4 1.7 1.9
(D) Measures of Investment
AEPS (Rs) 27.5 32.5 34.2 39.5
CEPS (Rs) 30.1 35.7 38.1 43.8
DPS (Rs) 7.0 9.0 10.0 11.0
Dividend Payout (%) 25.5 27.7 29.3 27.9
BVPS (Rs) 102.3 124.5 146.7 172.9
RoANW (%) 30.6 28.6 25.2 24.7
RoACE (%) 27.9 26.9 24.0 23.7
RoAIC (%) 37.2 31.3 30.9 33.0
(E) Valuation Ratios
CMP (Rs) 992 992 992 992
P/E 36.1 30.5 29.0 25.1
Mcap (Rs Mn) 101,929 101,929 101,929 101,929
MCap/ Sales 9.2 9.9 8.3 7.0
EV 100,963 99,121 98,132 96,311
EV/Sales 9.1 9.6 8.0 6.6
EV/EBITDA 25.0 23.9 21.3 18.2
P/BV 9.7 8.0 6.8 5.7
Dividend Yield (%) 0.7 0.9 1.0 1.1
(F) Growth Rate (%)
Revenue 51.9 (7.2) 19.3 19.2
EBITDA 104.6 2.6 11.3 15.0
EBIT 116.4 1.2 10.5 15.4
PBT 109.1 (0.1) 10.6 15.5
APAT 96.3 18.2 5.3 15.5
EPS 96.3 18.2 5.3 15.5

Cash Flow
(Rs Mn) FY19A FY20A FY21E FY22E
CFO 2,050 4,402 2,927 3,681
CFI (2,013) (1,492) (700) (500)
CFF (403) (1,101) (1,238) (1,360)
FCFF 36 2,909 2,227 3,181
Opening Cash 1,316 949 2,757 3,746
Closing Cash 949 2,757 3,746 5,568
E – Estimates

June 18, 2020 5

 DART RATING MATRIX
Total Return Expectation (12 Months)
Buy > 20%
Accumulate 10 to 20%
Reduce 0 to 10%
Sell < 0%

Rating and Target Price History

Month Rating TP (Rs.) Price (Rs.)

(Rs) VO Target Price Jul-19 Accumulate 2,052 1,817
2,450
Nov-19 Buy 2,430 1,950
2,090 Feb-20 Accumulate 2,238 2,025
Mar-20 Buy 958 690
1,730 Mar-20 Buy 958 796
1,370

1,010

650
May-19

Jun-19

Jan-20

May-20

Jun-20
Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Mar-20

Apr-20
Jul-19

Feb-20

*Price as on recommendation date

DART Team
Purvag Shah Managing Director purvag@dolatcapital.com +9122 4096 9747

Amit Khurana, CFA Head of Equities amit@dolatcapital.com +9122 4096 9745

CONTACT DETAILS

Equity Sales Designation E-mail Direct Lines

Dinesh Bajaj VP - Equity Sales dineshb@dolatcapital.com +9122 4096 9709
Kapil Yadav VP - Equity Sales kapil@dolatcapital.com +9122 4096 9735
Yomika Agarwal VP - Equity Sales yomika@dolatcapital.com +9122 4096 9772
Jubbin Shah VP - Derivatives Sales jubbins@dolatcapital.com +9122 4096 9779
Ashwani Kandoi AVP - Equity Sales ashwanik@dolatcapital.com +9122 4096 9725
Lekha Nahar AVP - Equity Sales lekhan@dolatcapital.com +9122 4096 9740
Equity Trading Designation E-mail
P. Sridhar SVP and Head of Sales Trading sridhar@dolatcapital.com +9122 4096 9728
Chandrakant Ware VP - Sales Trading chandrakant@dolatcapital.com +9122 4096 9707
Shirish Thakkar VP - Head Domestic Derivatives Sales Trading shirisht@dolatcapital.com +9122 4096 9702
Kartik Mehta Asia Head Derivatives kartikm@dolatcapital.com +9122 4096 9715
Dinesh Mehta Co- Head Asia Derivatives dinesh.mehta@dolatcapital.com +9122 4096 9765
Bhavin Mehta VP - Derivatives Strategist bhavinm@dolatcapital.com +9122 4096 9705

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