Stocks to buy today: Since hitting a 52-week low on June 22, 2022, Vinati Organics share price has been on an upward trend and has come close to its 52-week high. 2,323.80 each on the NSE. Motilal Oswal believes that the uptrend in chemical stock may continue and the stock may go up 2,593 each level. Vinati Organics share price today 2,236 each means that the brokerage is expecting a rally of around 16 per cent in this stock. Scrip recommends positional investors to ‘buy’ the scrip for the following 2,593 targets.
Highlighting the growth in the company’s revenue and profitability, Motilal Oswal’s research report states, “The company’s earnings have grown by 69% year-on-year. 16.2b, supported by price hike in FY22 on account of strong growth in volumes as well as increase in input cost.”
The brokerage further said that the COVID-led disruptions resulted in higher operating costs due to shortage of containers and higher freight costs due to higher electricity and fuel costs. Consequently, the EBITDA margin posted a contraction of ~10pp. VO’s PAT increased by 15 percent year-on-year 2.3b.
“The company is in the process of merging VAL with VO, which is expected to be completed by the end of FY23, in line with its growth strategy. This will result in integration of Butyl Phenol with Anti-oxidants (AO). Build synergies and generate incremental revenue of INR3b by FY24E,” the brokerage said, “This will enable better synergies, making VO the largest and only backward and forward integrated producer of AOs in India and AOs globally in India and globally. The demand is 12,000 TPA and 3 lakh TPA respectively.”
On valuation of the company, the brokerage report said, “Demand outlook for ATBS segment remains positive after temporary blip in FY22. Viral Organics Pvt. (Whole Owned Subsidiary of VO) to commence production of MEHQ In 1HFY24, Guaiacol, and Iso Amylene, which will drive the next level of development in VO.”
On his suggestion to positional investors with regards to Vinati Organics shares, Motilal Oswal said, “The stock is trading at 38x FY24E EPS and 30x FY24E EV/EBITDA, with a return ratio of 20-24 per cent. It is a fixed asset. Turnover is. 2x by FY22, which is likely to improve to 2.1x by FY24E. We value the company at 45x FY24E EPS to arrive at our TP 2,593. We maintain our Buy rating.”
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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