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Why Motilal Oswal is bullish on this specialty chemical stock
The brokerage has maintained a Buy rating on the stock with target price of ₹2,170 per share
Domestic brokerage Motilal Oswal has recently initiated coverage with a positive outlook on the Specialty Chemicals space. In a note on Monday, the brokerage said that it maintained a Buy rating on the Vinati Organics stock, with target price of ₹ 2,170 per share.
Motilal Oswal said that Vinati Organic (VO)’s FY21 Annual Report highlights its ability to adapt to change, while delivering robust results during the year. Despite these trying times, the company was able to maintain its status as market leader in the ATBS and IBB segments. ''With the capacity expansion of ATBS, the addition of Butyl Phenols, and ongoing capex for other IB derivatives, the company is confident of delivering growth, along with stronger synergies. We maintain a BUY rating on the stock, with Target Price of INR2,170,'' it added.
Disruption in various industries has led to demand concerns in ATBS, with a slower-than-expected ramp-up post the lifting of COVID-related lockdowns/restrictions. ''We expect demand for ATBS to grow 80–85% YoY in FY22 (30–35% on FY20 levels) – in line with the management guidance,'' the note said.
''The gradual ramp-up of expanded capacity over the next three years would drive huge growth for VO, with further development on product molecules currently under R&D. With new products such as AOs and Butyl Phenol resulting in import substitution, we expect the export mix to moderate to ~70% over FY23–24E (from 76% in FY21),'' it added.
The brokerage expects the company's revenue to grow 2.6x by FY24E (v/s FY21), with around 56% YoY growth in FY22E (in line with the management guidance). The company is confident of being among the top five global players for Butyl Phenol and AOs over the next 4–5 years, it said.
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